United States Steel_ A Corporation with a Soul Arundel Cotter 789 downloads.pdf

The Project Gutenberg eBook of United States Steel: A
Corporation with a Soul

This eBook is for the use of anyone anywhere in the United States and
most other parts of the world at no cost and with almost no restrictions
whatsoever. You may copy it, give it away or re-use it under the terms
of the Project Gutenberg License included with this eBook or online at
www.gutenberg.org. If you are not located in the United States, you
will have to check the laws of the country where you are located
before using this eBook.

Title: United States Steel: A Corporation with a Soul

Author: Arundel Cotter

Release date: March 12, 2015 [eBook #48465]
Most recently updated: October 24, 2024

Language: English

Other information and formats: www.gutenberg.org/ebooks/48465

Credits: Produced by Charlene Taylor, Charlie Howard, and the Online
Distributed Proofreading Team at http://www.pgdp.net (This
file was produced from images generously made available
by The Internet Archive/American Libraries.)

*** START OF THE PROJECT GUTENBERG EBOOK UNITED
STATES STEEL: A CORPORATION WITH A SOUL ***

UNITED STATES STEEL
A Corporation With a Soul

PUBLISHER’S NOTE

T
his book is planned as an open and aboveboard presentation of
the development of a great business. The story of the steel
industry is the story of the United States Steel Corporation; one
cannot be told without the other. It is hoped that this frank presentation of
facts about our greatest corporation gathered from the records of the
company will be of interest to the general reader.

Elbert H. Gary
“The story of United States Steel is the tale of
how Gary made his dream come true”

UNITED STATES
STEEL
A CORPORATION WITH A SOUL

BY
ARUNDEL COTTER

GARDEN CITY, N. Y., AND TORONTO

DOUBLEDAY, PAGE & COMPANY
1921

COPYRIGHT, 1921, BY
DOUBLEDAY, PAGE & COMPANY

ALL RIGHTS RESERVED, INCLUDING THAT OF TRANSLATION
INTO FOREIGN LANGUAGES, INCLUDING THE SCANDINAVIAN

COPYRIGHT, 1916, BY MOODY MAGAZINE & BOOK CO.

FOREWORD
When, in 1914–1915, I wrote “The Authentic History of the United
States Steel Corporation,” which has been enlarged and brought up to date
in the present volume, the Government’s suit for the dissolution of the
Corporation had not been decided. In fact, the lower court handed down its
decision just about the time the book was going to press.
It was my good fortune to hear the testimony of the most important of
the more than 400 witnesses and argument of counsel in the suit and to
supplement the information so gained by conversations with steel men,
inside and outside the Corporation, with whom my work brings me in
constant contact. And all that I learned convinced me more and more that
the big company was not illegal, either technically or morally, and that, in
fact, its influence on industry was beneficent. It is naturally a matter of
personal gratification that the suit has resulted in the complete vindication
of the Corporation.
We live in a day of big corporations and the tendency seems to be to
concentrate still more capital and manufacturing facilities. It is therefore
important that we should know something of their activities, not only
economic but social.
I believe that the United States Steel Corporation is one enterprise that
endeavors always to live up fully to the responsibilities it must perforce
assume to its employees and to the public, as well as to its stockholders. I
believe that it has earned the title of “A Corporation With A Soul”. And, so
believing, I have not hesitated to tell the story of United States Steel as I
have learned it by years of personal observation and contact.
Arundel Cotter.

CONTENTS
PAGE

Prologue. The Man at the Helm 3
CHAPTER

I. The Why and How of the Big Company 6
II. The Birth of the Big Company 22
III. Early History and Growth, 1901 to 1907 42
IV. The Tennessee Purchase 70
V. Men Who Made United States Steel 87
VI. Developing World Markets 111
VII. The Spirit of the Corporation 132
VIII. The Corporation’s Implements 142
IX. The Steel Towns 160
X. Humanizing Industry 174
XI. Investigations and Dissolution Suit 197
XII. Questions of Policy 217
XIII. Steel from the Investor’s Viewpoint 235
XIV. The Great Steel Strike 246
XV. Helping Uncle Sam Win the War 269
XVI. The Middle Period, 1907 to 1914 283
XVII. The War and After 295
Appendix 308

LIST OF ILLUSTRATIONS

Elbert H. Gary Frontispiece
“The story of United States Steel is the tale of how
Gary made his dreams come true.”
FACING PAGE

Andrew Carnegie 40
J. Pierpont Morgan 41
Down in a Coal Mine 56
Open Pit Mining—Canisteo Mine 57
Mine Stables 72
Modern Coal Mining by Machinery 73
Bee-hive Coke Ovens 88
Mouth of Coal Mine—Coke Ovens in Background 89
James A. Farrell 120
Transporting 222 Tons of Bridge Material in China 121
“Drawing” Bee-hive Coke Ovens 136
Two Views of Modern By-Product Oven 137
The Original Jones Mixer 152
A Bessemer Blow 153
Interior of Gary School 168
Ore Cars at Proctor Yards 184
General View of Duluth Ore Docks 185
Ore Boat and Train 200

Ore Boats at Duluth Docks 201
A Trainload of Ingots in Molds 216
Ingot on Way to Rolling Mill 217
Rails on Cooling Bed 232
Pouring Ingots 233
Part of the Duquesne Works—Detail of Unloading Ore—a
Hulett Machine 248
Making Wire Rods—Old Method 249
Coils of Red Hot Wire 264
Annealing Wire 265
Drawing Fine Wire 280
Making Wire Fencing 281
Making a Steel Tube 296
Steel Transportation by Man Power in China 297

UNITED STATES STEEL
A Corporation With a Soul

UNITED STATES STEEL

PROLOGUE

THE MAN AT THE HELM

E
very business enterprise, however great, reflects in its dealings
with its competitors, customers, employees, and the public
generally, the individuality of some one man. Curious as it may
seem at first glance, this personal touch, far from being lost, is particularly
evident in the greatest of all business enterprises, the United States Steel
Corporation.

Many men, including some of the ablest financiers the country has
produced, have assisted in a measure in making the Corporation what it is
to-day. Morgan, Frick, Perkins, all these and others, have helped with their
counsel in bringing the Corporation to the pre-eminent place it holds in the
industrial world. But one man has stood out among all these—Elbert H.
Gary, its chairman and chief executive officer.
Throughout its ramifications the Steel Corporation is everywhere a
reflection of Gary’s spirit. His influence, from the time of its incorporation
nearly twenty years ago, has shaped its policies and, almost from the
beginning, has dominated its counsels. For what the Corporation is, whether
good or bad, Gary must accept full responsibility.
Judge Gary himself would probably object to the use of the word
“dominated.” He would doubtless prefer “guided”, for his dominance has
never been autocratic. But his colleagues, except perhaps in the earlier days,
have confidently accepted his opinion on all matters pertaining to the
Corporation’s welfare. And the events of the last few years have proven that
they were right in so doing.
Not the Corporation alone but the entire steel trade, the most important
manufacturing industry in America, has benefited from Gary’s wisdom. As

the chief executive officer of the leading interest in the industry his
competitors have always looked to him for leadership in periods of stress.
And whenever occasion arose, as in the dark days of the panic of 1907, he
proved his right to lead.
There have been times when this leadership was in question if not
doubt. One such occasion was as recently as 1919 when the great steel
strike threatened.
Gary’s attitude toward labor was well known. He believed in “leaning
over backward” in the matter of giving justice to the worker. And when
union organizers and radical agitators attempted to force the closed shop on
the industry many of his competitors feared that he would yield to the
demands of the labor organizers.
But Gary had never flinched from responsibility, however great. Here
was a question of principle involved, concerning not the rights of the
employer alone but those of the very large number of unorganized workers.
Although pressure was brought to bear upon him from high quarters to
compromise and avoid a strike, and later to settle it once begun, the head of
the Corporation unswervingly stood his ground and led the steel trade to a
signal victory. He proved to those who doubted him that, though he might
usually adopt the attitude of “suaviter in modo” he knew how to assume
that of “fortiter in re” when occasion warranted.
On October 24, 1919, the annual meeting of the American Iron and
Steel Institute was held in New York City, at the Hotel Commodore. Some
sixteen hundred of its members, including the majority of the leading
figures in the steel trade, attended. The steel strike had been going on for
some weeks and the steel men were gathered to hear what Gary had to say.
The entrance of the Judge into this gathering was the signal for a most
remarkable demonstration. For these staid, solid business men, on catching
sight of Gary, broke into a spontaneous salvo of cheers which was
enthusiastic and prolonged. It was a tribute to his generalship in the struggle
then being waged, an unequivocal admission of his right to supreme
command. In that storm of cheers were buried all doubts that may ever have
been entertained.

It is impossible to write of the Steel Corporation without writing of its
head. His influence on it is too direct, too personal, to be ignored. The
Corporation, in a sense, is Gary. He has infused it with his spirit, a spirit
which, it is to be hoped, will continue always to animate it.

CHAPTER I

THE WHY AND HOW OF THE BIG COMPANY

M
ere size, to the majority of us, presents a certain fascination.
Especially is this the case when it is the result of human
endeavor. Hence, were the United States Steel Corporation
nothing but the largest business aggregation in the world its immensity
alone might justify placing upon record the facts connected with its
formation and its subsequent history.

The Corporation’s vast capitalization, a billion and a half of dollars, its
yearly turnover exceeding its capital, its payroll of 275,000 workers, or,
with their families, enough to populate a large city, its productive capacity
of more than 16,000,000 tons of finished steel annually—to say nothing of
other products—the volume of freight carried in its fleet of ore boats,
several times the tonnage passing through the Suez Canal, its foreign trade
of two hundred million dollars—these alone might make the Corporation’s
history worth the telling.
But size, properly considered, is of minor importance in itself. Its
importance lies in the power it bestows to influence its surroundings. The
greatest of all industrial enterprises could not fail to affect industrial history
generally. And the management of the Corporation has recognized its
responsibility in this regard and has endeavored to use its strength not
selfishly but for the good of all concerned. It is not too much to say that the
organization of the United States Steel Corporation marked the beginning of
a new and a better era in industrial history.
That this assertion may be challenged goes without saying. But the
facts will be permitted to speak for themselves.

The United States Steel Corporation was, in a modified sense, an
experiment in popular ownership, the ownership of industry by the worker;
it substituted for the ownership by a few men of a number of more or less
important organizations one gigantic unit owned by a multitude. To-day the
Corporation’s stockholders number around 160,000, and this figure includes
only holders of record. Perhaps 75,000, possibly more, of its employees
either own stock outright or are buying it on the instalment plan. Counting
five to the family it is probable that close to 1,000,000 people are
financially interested in the success or failure of the Corporation.
At the time of the big company’s birth corporate publicity was
practically unknown. Important developments affecting the interests of
security holders were announced, if announced at all, at the convenience of
the so-called insiders. Curiosity into corporate affairs was discouraged. But
the new business giant set the example of publicity by giving out at stated
and frequent intervals detailed information regarding profits, business on
hand, and other facts of interest to stockholders and the investing public.
This example was later followed by other important steel companies and,
with the passage of the years, the practice has become fairly general among
large corporate enterprises. Thus the organization of the Steel Corporation
may be said to mark the beginning of the era of corporate publicity.
But the most marked effect of the Corporation’s organization was
probably that respecting competition. In the old days of the steel trade
competition had been ruthless. The big steel merger, if the sworn statements
of its competitors may be accepted, put an end to this and substituted an era,
of competition still, but of competition clean and aboveboard, governed not
solely by greed but by the spirit of fair play between manufacturer and
manufacturer. It brought the dawn of the epoch of the square deal between
industrial competitors.
In order to get a true perspective on the events immediately leading up
to the formation of the United States Steel Corporation, it is necessary to
review briefly the history of the steel industry in the United States during
the latter half of the nineteenth century, and especially during its closing
decade.
In a short half century steel making in America had grown from the age
of swaddling clothes to full manhood, or rather gianthood. It stood supreme

among industries. From being unimportant among the iron and steel
producing nations, the United States, in a comparatively few years, had
forged its way to the first place. Its steel mills turned out nearly half of the
hard metal used by the world. Steel, from being an industry composed of a
few scattered mills situated as nearly as possible to ore deposits with little
regard to markets, had become one consisting of great corporate entities
each made up of many plants, and these had in their service railroads and
steamships plying to and from ore fields situated sometimes hundreds of
miles from the plants, bringing to the mills such quantities of the raw metal
as but a short time before had not been known to exist. It had bent to its use
every modern invention, the newest discoveries of science. Fortunes had
been spent, won, and lost in building up these great structures. It had at the
same time been an industry subject to the most amazing fluctuations,
periods of feast being followed closely by periods of famine.
This half century, or the last two decades of it, was, as has been
suggested, a period of war to the hilt between manufacturer and
manufacturer, war in which no quarter was asked or given. The history of
the steel industry in America bristles thick with the names of millionaires
who worked their way to fortune from the slag pile. And for every one of
these there were many, whose names are forgotten, who sacrificed health,
strength, and fortune in the mad fight for the wealth that poured in unstinted
stream from the glowing furnaces of molten iron. The law of steel was
essentially that of the survival of the fittest.
Perhaps there is no other great industry that has been so subject to
fierce and unrestrained competition as steel making once was. To
understand why this is so it is necessary to get an idea of the conditions
influencing it. The discovery of the Bessemer process—about the middle of
the nineteenth century—by which steel could be made cheap enough to
permit of its general use found a world more than ready for it, and the
demand for the metal grew by leaps and bounds. The Age of Steel did not
dawn; like the tropic day, it broke with fierce glare. The sudden demand
naturally opened up vistas of previously undreamed-of wealth for those
who could supply it, and, in the desire to secure this wealth, production
sprang forward so quickly as even to outstrip demand, strong and increasing
as it was. Then ensued the inevitable battle for what business there was, a

battle that lasted until consumption took another spurt, which, in turn,
resulted in quickening output and a resumption of the battle.
At that time the country was just opening up. Railways were stretching
their lines into the golden regions of the West; manufacturers of farm
implements were calling for steel to be fashioned into tools to reap the rich
crops of the wide prairie lands; inventors were each day evolving some new
use for the metal. Was it any wonder then that steel became a world
necessity and that the blast furnace became a philosopher’s stone that
transmuted dull ore into precious gold? More and larger fortunes, it has
been truly said, were made out of steel in the second half of last century
than ever came out of the mines of the West or the diamond deposits of
South Africa. And in the insane struggle for this so-freely-poured-out
wealth men lost all sense of proportion.
It is inevitable that there should be a dark side to the picture. The boom
times of the steel trade were succeeded with disheartening regularity by
periods of dearth. One year steel manufacturers were building themselves
palaces and purchasing steam yachts, the next they were mortgaging all
they had to pay wages. One year the steel worker was a man favored above
all others of his class, the next he was getting his meals on charity from the
“soup houses.” To this day steel veterans speak of the dull times of the trade
as “soup-house days.”
At these times competition, always fierce, became more ruthless than
ever. The old adage regarding love and war was stretched to include the
steel industry, and everything was considered fair that might help to keep
the mills running full. Prices were cut—and wages with them; steel was
“dumped” on foreign markets at less than manufacturing cost, and steel
makers resorted to every means that offered to divert orders from
competitors to themselves. It was case of dog eat dog, and failures, with
their unavoidable accompaniment of unemployed labor, were all too
frequent.
These were the days when the steel “pools” flourished. These pools
were simply attempts on the part of the steel makers—who thoroughly
realized that the killing competition just described could benefit no one—to
protect themselves in times of stress by binding each other not to sell below
a certain price or more than a specified tonnage, and by making it of no

avail, from a viewpoint of profit, to do so. There were rail pools and wire
pools, shafting pools and plate pools, structural pools, horseshoe pools, and
in fact a separate and distinct pool for nearly every steel product made.
These pools were merely treaties, but treaties in which no participant
trusted the other and which consequently were usually broken by each as
soon as the opportunity to get ahead of his fellow pool member presented
itself—lest the other should get a similar opportunity first and take
advantage of it.
It is doubtful if a single pool agreement, and their number was infinite,
was ever honestly kept. Old steel makers chuckle to-day as they relate how
each representative of a company taking part in a pool sought to gain an
advantage over his competitors while the agreement was yet a-borning.
Listening to them one begins to wonder if these were indeed men who bore
high and honorable reputations in the business world.
According to the statements of men who themselves took part in pools
it was no uncommon thing for a manufacturer to station a salesman outside
the building where a conference was being held and, as soon as a price
settlement was reached, to stroll casually over to a window and by pre-
arranged signal indicate to him the level agreed on, whereupon the
salesman would proceed to undercut the price which his employer was even
then pledging himself to maintain.
“Every man’s hand was against his neighbor then; we were all
Ishmaelites, every one of us,” said John Stevenson, Jr., a veteran who had
worked under Carnegie, in his testimony in the Federal suit for the
dissolution of the Corporation. Mr. Stevenson then went on to relate the
story of a wire pool conference at which a price of $1.50 a keg for nails had
been agreed on. After the morning conference he went to the telegraph
office to wire his partner and found one of his fellow conferees there. He
waited until the other had handed in his message and walked away. While
Stevenson was writing his own wire the operator, in mistake, handed him
his competitor’s, asking him to decipher a word. And Stevenson discovered
that the message was an offer to a large consumer to sell him 10,000 kegs of
nails at $1.40! Whereupon he tore up the paper and substituted a bid of his
own at the same price and got the order!

Another instance, related by a large consumer, shows how these
agreements were evaded. He said that the company from which he
purchased his supplies of steel pleaded the force of a pool agreement as an
excuse against giving him a discount from the market price. He then
suggested that he be appointed agent of the steel company in his town at a
commission of a dollar a ton and this solution of the difficulty was agreed
to. He was the only consumer of steel in the town and the commission was
only a round-about way of giving him the discount asked.
In the fierce and bitter struggle that was the steel trade only the most
daring or the most unscrupulous manufacturer could survive, and under the
strain for production that it necessitated only the strongest workers could
live. No one, unless he has been through a steel plant, can imagine the
conditions under which the steel maker works. The visitor, unaccustomed to
the heat that is flung from blast furnace or rolling mill as from the gates of
hell, must perforce hold his hands before his face at times to mitigate the
frying sensation. True, much has been done of recent years to make the lot
of the man at the furnace or rolling mill easier, his work less trying on his
health. But at the time of which this is written such was not the case. Under
the most favorable conditions the steel mill, as a well-known steel maker
said once, is far from being a drawing room. Under the conditions that
prevailed toward the end of the last century, when men were worked to the
breaking point in the mad fight for “tonnage,” it was no wonder that the
majority of steel workers collapsed early under the strain and were thrown
on the human scrap pile, their vitality sapped and their youth gone.
The one slogan of the industry then was “tonnage.” Everything was
sacrificed by the manufacturer to this single end. Machinery, comparatively
new, was scrapped to make room for more modern equipment. Waste of this
kind was not considered. Production was everything, and nothing was
spared to obtain increased output. And it must be admitted that to this
attitude on the part of producers, as much perhaps as to her immense natural
advantages, the United States owed her rapid rise to the front rank of steel
nations.
In the middle of the nineteenth century American steel making was in
its infancy. In fact, this is also true of the steel industry of the whole world,
for it was about this time that William Kelly in America and Henry
Bessemer in England discovered what is known as the Bessemer process,

which made the metal available for the numberless commercial uses to
which it is now put. As late as the early sixties the idea of using steel for
railroad rails was scoffed at. In 1867 there were only three Bessemer plants
in this country and open-hearth, the steel of to-day, was unknown. Great
Britain supplied the world’s steel. But shortly after the third quarter of the
century was passed the United States forged to the lead, and has held it ever
since. In the year 1900 the steel production of this country was 10,188,329
tons, Germany coming next with 6,645,869 tons, and Britain third with a
production of 4,901,060 tons. In 1913 the United States produced
31,300,874 tons of steel, or more than Britain and Germany combined. In
1917 production was 45,060,607 tons, more than two thirds the world
output. To-day the rolling mills of the Pittsburgh district alone turn out more
than one third of the world’s steel.
The name of Andrew Carnegie is inextricably bound up with the
history of steel in the United States—and the world. “The Iron Master,” the
“Steel King”—by these names he was known, and he earned them. For
more than a quarter of a century Carnegie was the most important and
spectacular figure in the world of steel and his name will not be forgotten so
long as there is a rolling mill in Pittsburgh.
Carnegie’s rise from utter obscurity until he became the dominating
figure in the leading manufacturing industry of the world reads like a page
of fiction. Only the briefest sketch can be given here. Born in Dumferline,
Scotland, in 1835, the future Monarch of Steel came to the United States
with his father at the age of thirteen and began at the bottom of the ladder,
his first job being that of bobbin boy in a cotton mill, for which he received
a weekly wage of $1.20. Two years later he became a telegraph messenger
and later an operator for the Pennsylvania Railroad.
The youthful Scot’s ability soon attracted the attention of Col. Thomas
A. Scott, head of that great railroad system, and he made Carnegie his
private secretary, thus giving him his first foothold on the ladder of fortune.
Industrious and saving Carnegie was soon in the investor class and
when an opportunity arose to invest in what, it seemed to him, was an
attractive business he was able to seize it, purchasing a one-sixth interest in
the Iron City Forge Co. and becoming his own man.

One of his partners in the enterprise was Henry Phipps, the playmate of
his boyhood and his friend through good fortune and through bad. In every
one of his subsequent ventures Phipps had a share, and an important one,
that of raising money to carry out Carnegie’s manufacturing plans. In
Pittsburgh they say that Phipps’ horse knew every bank in town so often
had his master stopped him before them when seeking loans.
Those were the days of iron. Steel was still being made only “by the
spoonful.” But one day Carnegie saw in action one of the earlier Bessemer
converters, the implements that gave birth to the Age of Steel, and this
sight, impressive as it is even to the layman as a mere spectacle, converted
him from iron to steel. His keen mind saw immediately the immense
possibilities of the new process and he went into the manufacture of steel on
a large and growing scale.
And his success was phenomenal. Breaking down all obstacles in his
path to fortune he fought his way upward ruthlessly and became a terror to
competitors.
In 1901 Carnegie sold out the steel business he had created to the
organizers of the United States Steel Corporation for $303,450,000 in 5 per
cent. bonds and $188,556,160 in preferred and common stocks of the new
company, a total price of $492,006,160!
The mark that Carnegie left on the industry will never be wiped out. In
his late days he set the pace for all to follow, and it was a fast one. Although
pitiless to his competitors he had the gift of drawing to him men of high
ability; he was a wonderful judge of men, and to his intimates he was
generous and open. A born commander, a Napoleon of industry, he built up
an organization that had no equal in its day, one that was at the same time
extremely efficient and utterly loyal.
Whether Carnegie made the best use possible of his unquestioned
abilities is for posterity to decide. Beyond doubt America’s pre-eminence in
steel was due largely to him. But he was also at least partly responsible for
the unstable condition that existed in the trade of his day. Production,
tonnage, was his fetish, for in this he saw the means of reaching and
keeping his supremacy, and to get it he did not spare himself, the men under
him or, least of all, his competitors. His one effort was to keep the mills
running full, and everything was subordinated to that.

It is not generally recognized that Carnegie was to some extent
responsible for the formation of the United States Steel Corporation. The
part he played was behind the scenes. He wanted to sell out and retire, to
devote the rest of his life to philanthropy, education, and the promotion of
world peace. Even for such a master salesman as he the task of finding a
customer was gigantic, but he succeeded as he usually did.
The frequent and prolonged periods of depression had forced upon steel
makers the conviction that some way of combining to prevent their
recurrence was desirable, even necessary, if the United States was to keep
and increase its lead in the manufacture of the metal most needed by the
age. Between the years 1890 and 1900 industrial combinations were as
thick as the leaves in autumn. And steel had not escaped this tendency to
amalgamate. The Federal Steel Company, with $100,000,000 issued capital,
was the first large steel consolidation. The country’s wire plants had been
merged gradually into one company, the American Steel and Wire Company
of New Jersey, which controlled all but a small number of mills. A
somewhat similar situation existed in regard to tin plate, tubes, and
fabricated products. What might be called the steel companies proper were
themselves all mergers of small plants, the trade being divided among
several large competing units. A merger of these units had been talked of
time and again and its accomplishment was considered inevitable, sooner or
later, unless Carnegie first succeeded in crushing all competition and
establishing a virtual monopoly for himself, as many thought he would. The
time was ripe for a big steel combine.
And the time being ripe, the man was provided, the man destined to
take Carnegie’s place as the central figure in the steel industry, not only of
this country but of the world. He was Elbert H. Gary, then president of the
Federal Steel Company, one of the Carnegie company’s largest and most
important competitors, whose operations centred in the Chicago district.
Born on a farm near Wheaton, Ill., and educated to the practice of the
law, Gary’s work brought him into connection with many large corporations
including the Consolidated Steel and Wire Company and the Illinois Steel
Company, for which he was general counsel. When the Federal Steel
Company was organized in 1898 as a merger of the Illinois and other
companies, Gary, then a director of the Illinois company, took the principal
part in the organization activities. The executive ability he displayed so

impressed his associates and the Morgan interests, who financed the merger,
that he was unanimously chosen president of the new company. His
selection for this post, coming as a great surprise to himself, first gave him
a prominent part on the industrial stage, on which he has been the most
striking figure almost ever since.
Gary’s ambition, like Carnegie’s, knew no bounds; but where the little
Scotch ironmaster worked to make the steel industry an empire over which
he should reign supreme, Gary dreamed of an immense Republic of Steel.
Where Carnegie sought to unify the control of the steel trade and bring it
into his own hands, Gary sought to make the industry one owned by the
people, and particularly by the workers. Where Carnegie stopped at the
ocean and gave his attention to world business only at times when
overproduction at home compelled him to seek foreign markets temporarily,
Gary sought to establish a world-wide and permanent market for the
product of the blast furnaces and rolling mills of the United States.
And the history of the United States Steel Corporation is the story of
how Gary made his dream come true.
But the Federal Steel Company, its president soon found, was not an
instrument big enough or suitable for the carrying out of his plans. In the
first place, its plants were located at too great a distance from the Atlantic
seaboard to render an invasion of foreign markets feasible. Freight rates to
the ocean were prohibitive. And another hindrance was encountered in the
severe ups and downs to which the steel trade in this country was subject.
He saw that, if his dreams were ever to be made realities, the Federal Steel
Company must be enlarged and expanded, must provide itself with plants
able to export steel in competition with Great Britain and Germany, the
countries which ruled the international markets, and must so strongly
entrench itself that it would not be too greatly affected by periods of stress.
One man there was who could provide the wherewithal for the
expansion which the head of the Federal Steel Company considered
necessary. This was the late J. Pierpont Morgan. To Morgan, then, Gary
took his plans, but the banker was not enthusiastic. Perhaps he saw that
many steel concerns were not making money and feared to put so large an
amount of capital as was required into the venture; perhaps other motives
governed him; but, whatever his reasons, the great financier hesitated,

would not permit himself to be convinced. Again and again Gary tried to
persuade Morgan, but in vain, and at length Gary, satisfied that he must
seek other means to his end, turned his attention toward raising the
necessary capital elsewhere. He had already prevailed upon his fellow
directors of the Federal Steel Company to pledge subscriptions to a large
sum for the purchase or erection of new plants when circumstances played
into his hands. Morgan decided to give his backing to the formation of a
giant steel merger on the lines Gary had proposed.
The story of how Morgan was won over is an interesting one. It has
already been suggested that Carnegie was anxious to sell out, and Carnegie
usually got what he wanted. After many attempts to conclude a satisfactory
deal with different syndicates Carnegie, like Gary, arrived at the conclusion
that Morgan, and Morgan alone, was able to finance the purchase of his
properties. Therefore, he decided Morgan must be induced to buy.
At first Carnegie tried ordinary tactics. He had mutual acquaintances
suggest to the banker the advisability of a deal by which the Carnegie
company would be absorbed. Time and again this suggestion was made, and
on each occasion Morgan listened then sent for Gary. The latter, seeing that
this would be an excellent means of accomplishing what he desired for the
Federal company, as by absorbing the Carnegie company it would not only
secure a steel-making and steel-selling organization without equal at the
time but would also add to itself plants which could and would give battle
for world trade to Britain and Germany, did all he could to induce the
financier to accept the suggestions for the purchase of these properties. But
each time Morgan hesitated.
Then Carnegie resorted to coercion. Morgan was heavily interested in
the National Tube Company which was itself an amalgamation of a number
of smaller tube companies. Carnegie made no tubes. His entrance into the
business of manufacturing tubular products would undoubtedly have
brought the National Tube Company face to face with more serious
competition than it had ever encountered. And Carnegie threatened to build
a tube mill. This action had two purposes. It was apparently intended to
force Morgan to consider the purchase of the Carnegie properties, and it
was also a retaliatory measure against the decision of the National Tube
management to erect steel mills which would render the company
independent of the Carnegie Steel Company for its supplies of raw material

and would incidentally deprive Carnegie of a large customer. Carnegie
announced his plans for the proposed tube mill publicly and bought a site
for it at Conneaut, Ohio. But although Morgan knew that the steel maker
was able and ready to carry out his project he gave no sign of having
changed his mind.
Carnegie’s next step was more important and serious. He threatened to
build a railroad paralleling the Pennsylvania Railroad from Pittsburgh to the
coast, a project which, if carried through, would without question have
materially damaged the earning power of the great railroad system and
would have been a heavier blow to the Morgan interests than the erection of
a tube mill. But again Morgan paid no attention. It is extremely doubtful if
Carnegie, powerful as he was, could have seriously intended to attempt
such an undertaking, and therein may have lain the reason for the banker’s
seeming indifference. On the other hand, those who knew Carnegie
declared that he would have found means to build the suggested road, even
as he had in the past done other things deemed to have been impossible.
That Carnegie had no desire to enter into a pitched battle with the
powerful Morgan interests seems to be fairly well established by his next
act. Coercion having failed, he again resorted to peaceful tactics and fired
what, possibly, was his last shot. And here it might be interjected that, while
the event that directly led up to the formation of the Steel Corporation has
been narrated scores, probably hundreds of times, the part that Carnegie
played therein has usually been overlooked.
Among the Carnegie partners was a young man, Charles M. Schwab,
president of the Carnegie Steel Company. Schwab not only represented the
top notch of efficiency as a steel maker, a salesman, and an executive, but
he had a veritable tongue of gold. To listen to him was to be converted to
his views; he could talk the legs off the proverbial brass pot. And Carnegie
saw that if the man lived who could convince Morgan to finance a purchase
of the Carnegie Steel Company that man was “Charlie” Schwab. Carnegie
therefore decided to bring together the financier and the president of the
Carnegie Steel Company and to let loose on Morgan the flood of Schwab’s
eloquence.
On the night of December 12, 1900, Edward Simmons and Charles
Stuart Smith, both close friends of Carnegie, gave a dinner to which

Morgan was invited. And to Schwab was assigned the duty of making the
speech of the evening. Ostensibly the dinner was merely a social affair with
no ulterior motive, but in the light of subsequent events it may be
considered certain that it was arranged at the suggestion of Carnegie, and
that its purpose was the sale of his properties to Morgan.
Everything went off as planned. Schwab chose for his subject the steel
company of the future. He played upon this theme as upon a harp to an
attentive audience, not the least attentive of whom was the banker, and,
while he never referred directly to the Carnegie company, he made it very
clear that the concern which he described in glowing terms would of
necessity own and control the Carnegie plants.
Schwab foretold a future of wonderful brilliance for the steel industry.
He drew a word picture of a company big enough to insure the greatest
economies in the securing and distribution of its raw material, but highly
specialized by departments, each and every plant confining its attention to
one particular product so as to secure the highest degree of efficiency. He
described such an organization as able to dominate the markets of the world
and to set a pace that neither England nor Germany could follow. The ideal
structure he painted was such an one as was well worthy the attention of the
greatest of bankers, an industrial enterprise for which even the great
Morgan might well be proud to stand sponsor.
And the youthful Carnegie president swept the financier off his feet and
along with him in the flood of his oratory. The United States Steel
Corporation was not actually incorporated for some months, as an
undertaking so immense naturally took a great deal of time to put through,
but it was by that speech that the idea of a vast steel merger, sown in
Morgan’s mind by Gary, was quickened into life. In that half hour the
United States Steel Corporation, to all intents and purposes, became an
actual fact.

CHAPTER II

THE BIRTH OF THE BIG COMPANY

A
billion dollars!

During the past seven years the world has grown accustomed
to big figures. The enormous expenditures caused by the war and the
growth of the national debts of most countries, attributable to the same
cause, have made the mention of a sum expressed in ten or more figures
rather commonplace. But back in 1901 a billion dollars was an almost
unthinkable sum and it was hardly any wonder that the financial world
gasped when the plans for the new corporation, with an authorized
capitalization of $1,100,000,000 in stock and $304,000,000 in bonds, were
announced.
Wall Street had long been accustomed to treat millions with the dollar
sign before them as mere trifles and even tens of millions were more or less
commonplace. Hundreds of millions commanded respect. But a billion, a
thousand million—that seemed merely a row of figures, something that
could hardly be computed.
And, indeed, the mind cannot readily comprehend what a billion
means. Some concrete comparison is needed to give a faint idea of the
immensity of the capital of the “Steel Trust.” A king’s ransom? It would
have ransomed a hundred kings! The fabled wealth of Ormus and of Ind, of
Croesus, of Montezuma, all these fade into insignificance when compared
with this gigantic aggregate of money.
If the authorized capital of the United States Steel Corporation could be
turned into solid gold it would weigh 2,330 tons, or more than 5,200,000
pounds!

This gold would have a cubic content of 3,880 feet!
With it you could build a pillar six feet square and towering 108 feet in
the air; or a Cleopatra’s needle of virgin gold six feet square at its base and
tapering to a point at a height of more than 430 feet.
A train of fifty-eight railroad cars would be required for transporting
the precious metal, with two big engines, one at either end, to move the
train!
For storage room the gold would require a vault 8 feet high, 20 feet
wide, and 24½ feet long, and there wouldn’t be an inch of spare room!
Placed at one end of a scale the gold would need 34,666 men of
average weight to balance it!
If the Corporation’s capital were coined into five-dollar gold pieces
they would pave a road twenty-five feet wide for more than ten miles!
Stacked one on the other these coins would reach a height of more than
twenty miles!
If this huge sum were converted into pure silver it would weigh 87,500
tons, with a cubic content of 268,000 feet!
This silver would form a needle six feet square at the base and piercing
the skies to a height of 29,776 feet, or above the highest crest of the
Himalayas!
It would take 2,200 freight cars to load it, and about fifty-five powerful
locomotives to pull these cars!
This $1,404,000,000, changed into dollar bills, would measure 166,200
miles, forming a ribbon that would girdle the earth six times and leave two
streamers each 8,000 miles long floating behind! A ribbon that would reach
more than two thirds the distance to the moon!
These bills would cover an area of 228,317,433 square feet!
An expert bank teller working eight hours a day, Sundays and holidays
included, and counting one bill a second without rest, would take more than
133 years to count them all. If he started to count on January 1, 1921, one of
his descendants might count the last bill in the pile about the end of June,
2054!

If the Corporation’s capital were divided evenly it would give every
man, woman, and child in the United States about $14!
The interest on this sum at 6 per cent. would keep some 35,000
American families in comparative comfort without touching the capital!
From the date of the Simmons dinner to that on which the plans for the
new corporation were announced was a very short period. The birth of the
Corporation did not take long. Once convinced that a merger of a number of
large companies making various steel products was practicable and
desirable for the good of the industry and of the country—as well as for the
pockets of the consolidators—Morgan and his associates lost no time in
bringing it about. The dinner took place on December 12, 1900; United
States Steel was formally chartered on February 25th of the year following
and began business as a corporate entity on April 1, 1901.
It is likely that Schwab himself did not foresee how far reaching would
be the effects of his speech. Morgan did not do things by halves. When the
young steel maker caught his attention and drew a picture of a company big
enough to manufacture all lines of steel and to specialize on each one,
powerful enough to enter and occupy foreign markets and rich enough to
expand to meet the growing demand for the metal without danger of over-
stretching its resources, he painted with his words something which the
banker thought it would be a proud thing to father. Morgan saw before him
unlimited possibilities, not of money making alone—for this was by no
means the ruling passion of his being—but of creating an organization that
should leave an indelible impress for good on industrial history, a business
so great that its actions could not fail to force themselves upon the attention
of the world and to command imitation on the part of other industries. A
business, moreover, so powerful that it would not need to resort to the
dubious practices of the old days to succeed.
The great steel concern that Schwab discussed corresponded very
closely to the company that Gary had long been urging Morgan to assist in
creating by the expansion of the Federal Steel Co. Immediately after the
dinner Morgan drew Schwab aside and the latter then went more fully into
the subject of a vast steel merger than he had been able to in the confines of
an after-dinner oration. Finally the financier asked Schwab if he thought
Carnegie would sell, and upon receiving an affirmative reply Morgan

requested the terms. A few days later Schwab reported that Carnegie’s price
was $303,450,000 in bonds and $188,556,160 in stock of the suggested new
company. After a prolonged consultation with Gary, Robert Bacon (one of
his partners), and others, Morgan accepted these terms.
As a nucleus of the proposed steel corporation, then, we have the
Carnegie and the Federal companies. But Gary’s plans had provided for the
manufacture of a number of products made by neither of these two
concerns, and Schwab, in his talk, had pictured an industrial organization
that would turn out from its mills every kind of steel product, that would be
able to supply its customers with everything made of the metal from a nail
to a railroad car. Morgan was not a man of half measures. There was no
need to make two bites of a cherry, even though it was a mighty big cherry.
Having once decided to finance the formation of the new company he
thought it might as well be comprehensive in its products, and so
negotiations were immediately set on foot with the controlling interests in
the leading concerns making wire, tubes, tin plate, etc., with a view to
bringing them all into the consolidation.
The Morgan interests had financed the organization of the National
Tube Co., the principal figure in which was Edmund C. Converse, so the
tube company naturally was taken in. The other concerns and interests
which it was proposed to unify into the new corporation were the American
Steel & Wire Co., the chief figures in which were the late John Warne
Gates, Alfred Clifford, William Edenborn, and others; the four companies
forming the so-called Reid-Moore group, controlled by Daniel G. Reid and
William H. Moore—namely the National Steel Co., American Tin Plate
Co., American Sheet Steel Co., and American Steel Hoop Co.
By the early part of February, 1901, the negotiations were concluded
and the plans for the organization of the United States Steel Corporation
were announced. They provided for the amalgamation of these eight
companies, the smallest of which had a capitalization of $33,000,000 and
the largest of more than $300,000,000. Before the plans were finally put
through, however, two more units were added to the list, the Lake Superior
Consolidated Iron Mines, dominated by the Rockefeller interests, and the
American Bridge Co., at the head of which was Percival Roberts, Jr. The
absorption of the Lake Superior Consolidated Co., with its vast ore holdings
and steamship fleet, was deemed necessary to ensure the Steel Corporation

an adequate ore reserve. The American Bridge Co., which secured most of
its supplies of steel from the Carnegie company, seemed to fit naturally into
the plans for the consolidation.
Thus there were ten large companies taken in, merged to form the
United States Steel Corporation. They had an aggregate capital of
$867,550,394, as follows:

COMMON PREFERRED
COMPANY
STOCK STOCK
American Bridge Co. $30,527,800 $30,527,800
American Sheet Steel
Co. 24,500,000 24,500,000
American Steel Hoop
Co. 19,000,000 14,000,000
American Steel & Wire
Co. 50,000,000 40,000,000
American Tin Plate Co. 28,000,000 18,325,000
Carnegie Steel Co. A
160,000,000 160,000,000
Federal Steel Co. 46,484,300 53,260,900
Lake Superior
Consolidated Iron ......
Mines 29,424,594
National Steel Co. 32,000,000 27,000,000
National Tube Co. 40,000,000 40,000,000
Total. $459,936,694 $407,613,700

A
Bonds. All other figures in this column represent preferred
stock.

The American Bridge Co., as its name implies, was a fabricator of
bridge material and structural steel generally. It was not a steel company in
the strict sense. It obtained a large proportion of its supplies of steel from
the Carnegie company and fabricated this material. It had a capacity of
approximately 600,000 tons yearly. The company was incorporated in May,

1900, as a consolidation of a number of smaller concerns and had a surplus
of $4,030,331. Holders of its preferred stock received $110 in preferred
stock of the new corporation for each $100 of their holdings, while the
common stockholders received $105 in U. S. Steel common for each $100
of their holdings.
Four companies, as has been stated, formed the “Reid-Moore” group.
The American Tin Plate Co. was chartered in December, 1898. Like all the
concerns forming this group it was considerably over-capitalized.
Nevertheless, its earnings in the first year of its existence were
approximately $3,600,000 or 20 per cent. on its preferred capital, and in
1900 they exceeded $5,750,000, or about 32 per cent. on the preferred
capital. At its formation it acquired thirty-nine different plants, embracing
279 mills, manufacturing tin and terne plates. Its preferred stockholders
received $125 in U. S. Steel preferred stock for each $100 of their holdings
and its common stockholders $120 in preferred and $125 in common stock
of the new corporation for each $100 of their holdings.
The National Steel Co., another of the Reid-Moore concerns, was the
maker of raw material for the other three members of the group. Its
production was largely confined to semi-finished products and it had a
capacity of about 1,700,000 tons of steel a year. It had some ore holdings in
the Mesaba Range as well as a twenty-year contract for a one-sixth interest
in the ore production of the Oliver Iron Mining Co. The company was
chartered early in 1899 and in the first year of its existence earned
approximately $8,750,000, or more than 32 per cent. on its preferred stock.
Of this amount, however, $3,617,000 was written off for depreciation. At
the time it was merged into the Steel Corporation it had surplus and
undivided profits of $6,910,995. Holders of both its common and preferred
stock for each $100 of their holdings got $125 in the corresponding stock of
the new corporation.
The American Steel Hoop Co., third of the group, was formed a month
or two later than the National Steel Co. It was a consolidation of nine
concerns manufacturing chiefly bars, hoops, bands, cotton ties, and skelp,
and had an annual capacity of about 700,000 tons. Its earnings were not as
large as those of the others of the group, its first nine months’ operations
yielding a return at the annual rate of slightly under 7 per cent. on the
preferred capitalization. Its accumulated surplus on April 1, 1901, was

$1,660,311. The two classes of its stock were exchanged at par for the same
classes of U. S. Steel stock.
Last of the Reid-Moore companies to be organized was the American
Sheet Steel Co., chartered in February, 1900. This company acquired 164
sheet mills, nineteen puddling furnaces, and a number of open-hearth
furnaces and bar mills. It had a capacity of about half a million tons. Its
earnings, from the time it began business to April 1, 1901, amounted to
$1,676,480 and its surplus on the latter date was $705,757. Its stock was
exchanged for Steel Corporation securities on the same basis as those of the
Steel Hoop Company.
The National Tube Co., organized in June, 1899, was a merger of
thirteen smaller concerns having an aggregate capacity of about 850,000
tons of steel-wrought tubing. Its principal plants were located in the
Pittsburgh district. In the year 1900 the company reported net profits after
depreciation of more than $14,600,000, or about 35 per cent. on its
preferred capital stock. National Tube preferred stockholders exchanged
their holdings at the rate of $100 for $125 of U. S. Steel preferred, while the
junior stockholders received $8.80 in preferred and $125 in common stock
of the corporation for each $100 they held.
The Federal Steel Co., second only in size and importance to the
Carnegie Steel Co., was chartered late in 1898, as a merger of the Illinois
Steel Co., Minnesota Iron Co., Minnesota Steamship Company, Mount
Pleasant Coke Company, Lorain Steel Co., Elgin, Joliet & Eastern Railway
Co., and the Johnson Co. of Pennsylvania. The steel companies it controlled
brought to it some of the best-equipped steel mills, manufacturing various
products, in the country, as well as a number of ore vessels and the principal
ownership of the Duluth & Iron Range R. R. Its earnings in 1899 were
approximately $9,100,000, or about 17 per cent. of its preferred stock, and
in 1900, $11,722,000, or about 22 per cent. Federal Steel preferred
stockholders received new preferred stock at the rate of $110 for each $100,
and the common stock was exchanged at the rate of $100 of Federal
common for $4.00 of preferred and $107.50 of the common stock of the
U. S. Steel Corporation.
The Lake Superior Iron Mines, dominated by the Standard Oil interests,
was formed in 1893. It was merely an ore company and had ore reserves,

owned or leased, estimated at nearly 400,000,000 tons. The company also
owned the Duluth, Missabe & Northern Railroad, and it was affiliated with
the Bessemer Steamship Co., afterward purchased by the Steel Corporation.
The earnings of the Lake Superior company were enormous, having been
nearly 58 per cent. on its capital in 1900. For each $100 of its stock—there
was only one class—$135 each of preferred and common stock of the U. S.
Steel Corporation were exchanged.
The American Steel & Wire Co., of New Jersey, was a consolidation
effected in January, 1899, of the majority of the country’s wire mills. It had
a rod mill capacity of more than 1,100,000 tons and a wire nail capacity of
more than 10,000,000 kegs, or more than 500,000 tons. It also owned
extensive ore and coking coal properties. In the first year of its operation
the wire company earned nearly $19.00 a share on its common stock after
an allowance of $1,200,000 for depreciation, and in 1900 its earnings
applicable to the common stock were $4,202,129, or nearly 8½ per cent. on
the issue. Its preferred stock was exchanged on a basis of $117.50 U. S.
Steel preferred for each $100, and its common stock on the basis of $102.50
of Steel common for each $100 of Steel & Wire.
We come now to the largest and most important of the ten companies
originally merged into the monster Steel Corporation—the Carnegie Steel
Co., the great organization ruled by the Monarch of Steel and turning out
from its furnaces and mills practically one fifth of all the steel made in the
United States; and, incidentally, pouring undreamed-of wealth into the
pockets of Carnegie and his associates. A company that realized profits in
1899 of nearly $24,000,000 and in 1900 of approximately $40,000,000!
The Carnegie Steel Co. was a merger of the Carnegie and Frick
interests. By its absorption the new corporation secured possession of the
greatest steel organization of its time, as well as of the important coke
holdings of the H. C. Frick Coke Co.—owning about 40,000 acres of
coking coal lands, 11,000 coke ovens, and other property—a controlling
interest in the Oliver Mining Co. with its large ore possessions, and the
controlling interest in the Pittsburgh, Bessemer & Lake Erie Railroad, not to
mention a number of other concerns and interests of less importance.
Unlike most of the other merged companies, the Carnegie Steel Co. had
all its steel-making plants concentrated in the Pittsburgh district. It was in

this locality that Carnegie had built up his great business machine and his
fortune. He had never attempted to build elsewhere, with the exception of
his threat to erect a tube plant at Conneaut. Carnegie believed in the future
of Pittsburgh. And he himself did more than any one else to assure that
future. Carnegie it was who had made Pittsburgh the steel centre of the
universe. And his plants there, at the time they were taken over by the
Corporation, had an annual capacity of some 3,500,000 tons of steel ingots
and more than 3,000,000 tons of finished products.
When the Carnegie company was reorganized in March, 1900—at
which time the merger with the Frick company took place—its capital was
placed at $160,000,000 in stock and a like amount in bonds. All the stock
and all but $50,000 of the bonds were taken over by the organizers of the
Steel Corporation and for these, as has been seen, a total of $492,006,160
was paid, as follows: for $159,450,000 Carnegie bonds an equal amount of
bonds of the new company was exchanged; another $144,000,000 in new
bonds was employed to take up $96,000,000 of the Carnegie stock while
$98,277,120 Steel preferred and $90,279,040 Steel common paid for the
remaining $64,000,000 Carnegie Steel stock.
In order to provide for the exchange of new stocks and bonds for the
securities of the constituent companies the new organization, which it had
been finally decided to name the United States Steel Corporation, was given
an authorized capitalization of $550,000,000 each in common and preferred
stocks and $304,000,000 in bonds, a total of $1,404,000,000. To ensure
sufficient working capital at the start a sum of $25,000,000 was put up in
cash by the syndicate, headed by the Morgan interests, which had financed
the transaction. This syndicate also turned over to the corporation $174,000
in securities of the merged companies which had been acquired by means
other than exchange, and expended some $3,000,000 as syndicate expenses.
For the cash, stock, and its services the syndicate received 648,987 shares
of preferred stock and 648,988 shares of common stock.
Practically all the stockholders of the old companies, satisfied that with
the Morgan backing the new company its success was fairly well assured,
took advantage of the exchange offer, with the result that at the end of the
first nine months of its existence less than 1 per cent. of the old securities
were still held in the hands of the public and of the Corporation’s capital as
authorized $1,319,229,000 had been issued. To-day only about three

hundredths of one per cent. of the stock of the ten companies is still held
outside the Steel Corporation.
The steel-producing equipment controlled by this vast aggregation of
capital comprised 149 steel works of various kinds, having an annual
capacity of 9,400,000 tons of crude and about 7,700,000 tons of finished
steel; 78 blast furnaces with a pig iron capacity of 7,400,000 tons; more
than 500,000 acres of coking coal lands; more than 1,000 miles of railroad
and a fleet of 112 vessels engaged in traffic on the Great Lakes, not to
mention large areas of ore-bearing property with uncounted millions of tons
of developed and undeveloped ore, as well as docks, natural gas, and
limestone properties, etc.
Just as the Corporation’s capital, wealth, and resources had never
before been approached by any industrial organization so its board of
directors surpassed in aggregate wealth that of any other company. The list
of the men who guided the Corporation’s destinies included J. P. Morgan,
John D. Rockefeller, and a host of others whose gigantic fortunes were
exceeded only by those of the two kings of finance named. The others were:
Elbert H. Gary, H. H. Rogers, Charles M. Schwab, Robert Bacon, Edmund
C. Converse, Francis H. Peabody, Percival Roberts, Jr., Charles Steele,
William H. Moore, Norman B. Ream, Peter A. B. Widener, James H. Reed,
Henry Clay Frick, William Edenborn, Marshall Field, Daniel G. Reid, John
D. Rockefeller, Jr., Alfred Clifford, Clement A. Griscom, William E. Dodge,
Nathaniel Thayer, and Abram S. Hewitt.
Their fortunes, if it were possible to add them together, would amount
to a sum greater even than the huge capital of the “Steel Trust.”
Of the original directorate of the Corporation only seven still survive
and only two are still directors. These are Gary and Roberts.
Charles M. Schwab was chosen president of the Corporation, Arthur F.
Luke treasurer, and Richard Trimble secretary. Elbert H. Gary became
chairman of the Executive Committee, and with him were Charles Steele,
Percival Roberts, and Edmund C. Converse. A Finance Committee was also
appointed with Robert Bacon at its head, and H. H. Rogers, Norman B.
Ream, Elbert H. Gary, and P. A. B. Widener as the other members. The
salaries of the president and of the chairman of the Executive Committee
were placed at $100,000 each.

It is hardly to be wondered at that many prophets declared the new
company was foredoomed to failure. Its very size, they claimed, would
render it unwieldy, and it would collapse of its own weight. And there was a
matter of something like half a billion dollars of common stock represented
by no tangible assets, pure water it was claimed. It was questioned if
dividends could ever be paid on this.
How could Morgan ever have been induced to back so great and so
impracticable an enterprise? Many asked this question, and found no
satisfactory reply. Some thought the banker had over-reached himself at
last, but the majority were convinced that the organization of the Steel
Corporation was merely a prodigious stock-jobbing scheme to put money
into the pockets of Morgan and his associates—and that, as such, it would
prove eminently successful. Few there were who had faith in the “Steel
Trust” as a practical business proposition.
But incredible as it may have seemed to those accustomed to the
vagaries of high finance as it was often practised in 1901, the promoters of
the United States Steel Corporation did not regard it as a mere venture in
financial legerdemain. They had the greatest faith in it as a straightforward
business enterprise. They believed in its future. Judge Gary, who took an
active part in the organization, has always insisted that it would be
successful and the enterprise justified. And the reader of the history of the
big company must judge for himself whether it has justified its
organization, not only from an economic, but more particularly from a
sociological standpoint.
Morgan, it has been said, considered the financing of the Steel
Corporation the crowning achievement of his career. Was he mistaken? Or
did he, in making possible this giant Corporation, erect himself a monument
more lasting than brass?
It has been admitted that a large part of the Steel Corporation’s original
capital was water. Just how much will never be decided. Herbert Knox
Smith, Commissioner of Corporations under President Roosevelt, estimated
that substantially half of the Corporation’s total issue of securities was not
based on any tangible property assets. Other critics have gone further, while
some have placed the amount of over-capitalization at a lower figure. Mr.
Smith’s figures, so far as they go, are probably approximately correct,

except that they made little or no allowance for the enormous value of the
Corporation’s ore holdings.
But does the cost of tangible assets indicate actual value? Does the cost
of erecting a factory or a business indicate the value of that business?
Manhattan Island was originally purchased for twenty-four dollars. A
business that is losing money is seldom worth the investment put into it,
and conversely a money-making concern must be valued on its earning
power. Many of the companies merged into the United States Steel
Corporation were immensely profitable, and even though they themselves
may have been over-capitalized, their value to the new corporation and to
their stockholders was greater than their capitalization.
The actual plant cost of the Carnegie Steel Co., to take one instance,
had been placed at about $75,000,000. That is, these plants in 1901 could
have been duplicated for that sum. But the organizers of the Steel
Corporation bought not only the Carnegie plants; they purchased an
organization that was at the same time the most efficient steel-making and
steel-selling machine in the world, an organization that the best-qualified
witnesses have declared was worth anything from $250,000,000 up. An
organization, moreover, that had earned $40,000,000 in a single year. And
what was true in the case of the Carnegie company was, in part at least,
applicable to most of the other concerns which went to make the United
States Steel Corporation.
Further, in organizing the big company, there were many conflicting
interests to be brought into harmony. It was necessary to secure control of
various enterprises in order to obtain the rounded-out organization aimed at
by Gary, Schwab, and the others. And each seller, naturally, was holding out
for all he thought it possible to get. It was, therefore, a matter of bargaining
and without doubt the result was that in more than one case the final price
was above the value of the thing purchased.
In this connection it is related that shortly after the corporation had
been formed the old Iron Master and Morgan met on a steamship on their
way to Europe, and Carnegie in the course of conversation intimated that he
considered he had driven a shrewd bargain with the corporation interests.
To which the banker is said to have replied: “I would have paid another
hundred million if you had asked it.” The story, the accuracy of which

cannot be vouched for, concludes that Carnegie never forgave himself for
his too-modest demands.
The general consensus of opinion is that the Corporation’s bonds and
preferred stock were both amply protected by assets at the time of its
organization but that the junior stock had nothing behind it but “blue sky.”
Admitting the justice of this claim, which has never been denied and
probably cannot be, this state of things no longer exists. Whatever water
once permeated the capital of the Steel Corporation has been squeezed out.
Year by year the directors have voted large sums out of earnings for the
erection of new plants, the extension of old ones, until approximately
$900,000,000 has been expended in this manner, this providing adequate—
more than adequate—protection for the common stock and putting the
Corporation beyond reach of criticism to-day on the charge of over-
capitalization.
Not long ago Judge Gary, testifying at Washington before a Senate
committee, asserted that the Corporation’s properties then—October, 1919
—were actually worth $2,200,000,000 in round figures, or well over
$700,000,000 more than its entire funded and stock capital. He asserted
they could not be replaced for that sum. And other steel men declare his
statement is justified.
When the Corporation began its existence the plants of its subsidiary
companies, as we have seen, had a capacity of more than 9,000,000 tons of
steel ingots, while its furnace capacity was only 7,740,000 tons. It was
compelled to purchase a large proportion of its pig iron requirements in the
open market. To-day its plants are capable, if worked at full, of producing
22,350,000 tons of steel ingots and its pig iron capacity is 18,400,000 tons.
Practically all this gain in production has been attained by “plowing” profits
back into additions and improvements with the object of putting actual plant
value behind every dollar of stock issued.
This consummation was arrived at about seven years ago and it was
then made known that the policy of using profits for building new mills and
furnaces or acquiring additional property had been abandoned and that
future expansion would be financed by the issuance of bonds, which would
permit stockholders to share more liberally in profits than they had in
previous years.

But although the Corporation, since the new policy was announced, has
put more than $400,000,000 into new plant, practically all expenditures for
extensions have been from earnings. The war, bringing about a boom in
steel, brought to the Corporation such large profits that it was possible to
use surplus earnings for extensions and yet pay big dividends to
stockholders, making new financing both unnecessary and unwise. At
present the Corporation is so strongly entrenched financially that the
possibility of borrowing for plant additions becoming necessary has been
put into the distant future, possibly eliminated forever.
We have seen how the Corporation was formed as a consolidation of
ten of the most important steel-producing concerns in the United States,
with a combined capacity of nearly two thirds the country’s possible output.
So great an operation cannot be considered merely as a matter of finance.
The biggest of trusts must of necessity contain enormous potentialities
affecting the general welfare of industry and of the State. Its organizers and
managers, in consequence, cannot resent fair-minded investigation into the
use it makes of its powers. Has the Steel Corporation’s existence been
prejudicial to the interests of its competitors, its customers, its employees,
or the general public? These questions will be treated in more or less detail
in the course of this history, but it might not be out of place to point out a
few salient facts on this subject at this point.
Since the Corporation began its existence a number of new steel
companies have sprung into being, grown and expanded, while the older so-
called independents have greatly increased their output. Although the
Corporation has added about 13,000,000 tons to its steel-making capacity
its competitors have added a still larger amount with the result that the big
company now controls less than half the steel production of the United
B
States.

B
See Appendix, page 308.

Enjoying the confidence of a number of steel manufacturers competing
with the Steel Corporation the writer has been unable after patient
investigation to find any evidence of its having at any time used its

immense wealth to undersell a competitor, large or small, with the purpose
of driving it out of business, while he has discovered more than one
instance where it has actually assisted competitors. A company, especially
one whose very size exposes it to envy and attack, could not fail to earn the
enmity of its competitors if its methods were not at all times fair and above
suspicion. The “Steel Trust’s” competitors have time and again, privately
and publicly and under oath, declared that they have no cause of complaint
against it.
That this attitude on the part of the independent steel men was inspired
solely by the fear that criticism levelled against the big corporation would
involve a trade war directed against the critic and his consequent ruin has
been suggested in irresponsible quarters. This is a poor compliment to the
heads of some of the country’s leading industrial organizations. No one who
knows Charles M. Schwab, John A. Topping, James A. Campbell, Willis
King, E. A. S. Clarke, and other big steel “independents” would regard the
charge as worthy of consideration.
How has the customer, the steel consumer, fared? The Corporation has
always been slow to advance prices and equally slow to lower them. It has
usually endeavored to prevent prices from reaching an abnormally high
level in “boom” times, when overwhelming demand had placed the steel
seller in control of the market, by setting a maximum quotation at a fair
level permitting any manufacturer a fair profit, and has thus protected the
consumer whose urgent need of the metal at a particular time made him a
prey to profiteering. Such a course was followed in 1914 and in 1917, both
periods of ascending prices. And it is being pursued again at the time this is
written. To-day the steel maker who has material for immediate or early
delivery can get enormous premiums, abnormally high prices, for his
output. But the Corporation is selling at the levels agreed on in 1919 with
the Industrial Board appointed at that time by the President and refuses to
advance its price although the Government itself abrogated the
arrangement. And whether for quick or deferred delivery it charges one
price. It refuses to give delivery preferment for any consideration, saying in
effect “first come, first served.”
And by endeavoring to prevent wild price reductions in periods of
depression it has afforded protection to consumers who made their
purchases at the top of the market, or near it, and who would have suffered

heavy losses from a break in the steel market not only from the reduction in
the value of their inventories but because their competitors might be able to
buy steel at much lower prices and undersell them.
Has the public, which always pays the bill in the long run and whose
interest is paramount, been injured? In the thirteen years from the
Corporation’s organization to the beginning of the European war the
tendency of steel prices has been downward, not only as compared with
those of other commodities, which ascended, but on a dollar-and-cents
basis. This tendency of prices will be discussed more fully in a later chapter.
The war, it is true, brought about a decided advance in steel prices, but in
comparison with other commodities they still show favorably. And there is
no question that quality has improved.
No better illustration of the Corporation’s price policy can be found
than that afforded by a comparison of the weighted average of actual prices
received by it for the past eighteen years on ten principal products with
Dun’s index number of all commodity prices indicating the fluctuations in
living cost for the same period. In this comparison 1903 is taken as the base
because, in that year, Dun’s index number was 99.456, or as nearly as
possible 100.

INDEX NO.
DUN’S INDEX CORPORATION’S
YEAR BASED ON
NUMBER PRICE RECEIVED
CORP. PRICE
1903 99.46 $37.56 100.00
1904 97.19 33.15 88.3
1905 98.31 32.89 87.6
1906 105.22 34.54 91.8
1907 113.66 36.59 97.3
1908 108.17 36.19 96.3
1909 119.02 32.52 86.5
1910 119.17 34.10 90.7
1911 118.13 31.88 84.8
1912 122.28 30.03 80.0
1913 116.32 33.25 88.5
1914 119.71 30.60 81.4

1915 124.96 30.67 81.6
1916 145.14 41.31 109.9
1917 211.95 60.08 60.0
1918 232.57 68.86 83.5
1919 233.71 62.66 167.0
1920 260.41 (nine mos.) 62.67 167.0

The ten classes of products used in arriving at the weighted average
are: Heavy rails; blooms, billets, slabs and sheet and tin bars; plates; heavy
structural shapes; merchant bars; bright coarse wire; wire nails; black
sheets; merchant pipe and oil country goods; black plate.

Andrew Carnegie

Nor has the steel worker been lost sight of. It is admitted by all familiar
with the subject that the Steel Corporation has been responsible for the
steady and decided advance in wages in the industry that has been
witnessed in the past nineteen years. Wages have been increased voluntarily
and without demand from the men whenever trade conditions made
increases possible. At the same time the Corporation has steadily set its face

against reducing wages in times of stress. And what is more important it has
spent immense sums of money in sanitation, education, and other ways of
bettering the wage earner’s lot, has helped him to save and invest his money
by offering special inducements for so doing, and has set an example in
industry generally that has done more for the cause of common labor than
has been accomplished by the labor unions themselves.

J. Pierpont Morgan

It may seem absurd to accuse the management of the Steel Corporation
of socialistic leanings. But among the 160,000 stockholders of the big
enterprise more than one third are men who work in its furnaces, mines,
mills, and offices, and these have become stockholders under the plan that
permits employees to acquire stock on the instalment plan and offers a
premium as an inducement to hold it. Does the history of the industrial
world contain another so striking instance of a step toward ownership of the
product of labor by labor itself, toward the highest and best socialism?

CHAPTER III

EARLY HISTORY AND GROWTH—1901 TO
1907

I
t was perhaps natural that the early years of the big new corporation
were not entirely without their troubles. The work of bringing
together and making into one harmonious whole a number of
different companies, with the smoothing out of mutual jealousies and
dispelling of distrust, was a far greater task than the actual financial
organization. And it was only with the passage of years that this was
successfully accomplished.

It will be remembered that Schwab, in his speech at the Simmons
dinner, had pointed to the advantages of integration which would be
possible in a big steel merger, and the fact that a concern like the Steel
Corporation, and such a concern alone, could successfully invade foreign
markets and develop, in competition with European manufacturers, a
permanent outlet for American steel. This was the same thought held by
Gary when he had previously urged Morgan to finance a big steel combine.
Briefly, these were the principal reasons for the Corporation’s existence;
and these were the objects which its founders immediately set themselves to
attain.
The early history of the Steel Corporation, therefore, will naturally be
found to have concerned itself largely with achieving these ends. It is to a
great extent the narrative of the various steps taken to coördinate the more
or less divergent units brought together in the new Colossus of Steel, of the
work that had to be accomplished, the difficulties that had to be overcome,

before it could fulfil its raison d’être and win the place it now occupies as
the most important business enterprise in the world.
Many dangers faced the new-born Corporation. Not the least of these,
although it was not realized at the time, was that, glorying in its giant’s
strength, it might use that strength mercilessly, like a giant. Had it chosen so
to do there is little doubt that it would have reaped some immediate
financial benefits, but events of later years proved conclusively that it
would have but laid the seeds for its own eventual destruction. That the
Corporation chose a different policy, and up to that time one almost
unknown in business, was due to the insistence of Judge Gary.
And here it might be said that he did not have by any means an easy
time in convincing all of his co-directors that the policies he advised should
be adopted. For years he had a constant struggle, but gradually he won over
all of his opponents to this point of view.
Another of the dangers that beset the path of the new Corporation lay in
the fact that it was not an operating company with a number of plants
controlled by one central management, but a holding company controlling
by stock ownership a number of industrial units which had previously been
owned by utterly conflicting interests and each of which continued
necessarily to operate under a separate management.
The natural corollary of this state of affairs was that the management of
each constituent, or subsidiary company, troubled itself solely about the
success of its own particular unit and took little interest, if any, in the affairs
of the other subsidiaries or the success of the Corporation as a whole. And
had this condition continued the attainment of the ends for which the
Corporation was organized would have been rendered impossible, its very
existence made vain.
To illustrate: the Carnegie Steel Co. and the Illinois Steel Co., a
subsidiary of the Federal Steel Co., had widely separated plants, and,
because of the important item of freight rates, sold for the most part in
different territories. But the two companies competed in a middle ground
and each had succeeded in encroaching on the other’s natural territory, in
some instances had attached to itself certain customers therein. To retain
these customers each company was compelled to sell in a locality adjacent
to the other’s mill at the same price as its competitor was willing to offer.

The Carnegie company, for instance, might have achieved the custom of a
railroad whose Eastern terminus was Chicago. To supply the orders of this
road it would have to pay freight tariffs from its mills near Pittsburgh and
deliver the goods to the road at Chicago at the same quotation the Illinois
company was naming for deliveries from its mills in the very suburbs of
Chicago. It is extremely doubtful if such a situation was really
advantageous to either company in the long run. It is certain that its
continuance would have been distinctly disadvantageous to the Corporation
that owned the stock of both concerns; it simply meant that the Corporation
would have to pay freight for carrying steel hundreds of miles when it was
able to deliver it from a mill practically at the customer’s door.
The officers of each company were naturally unwilling to hand over
custom they had built up by years of effort to a concern long regarded as a
competitor. Even from the standpoint of the then-existing conditions each
must have felt that it was his job to make a good showing for the company
he managed; he had no concern elsewhere. But, for the good of the whole
organization, it was absolutely necessary that these officers should be
brought to realize that they were working first of all for the United States
Steel Corporation, that inter-company jealousies must be buried for the
common good and the interests of the party made subservient to the welfare
of the state. And the way to do this was to make the interests of the
Corporation, the controlled company, and the individual worker identical.
Andrew Carnegie had built up the greatest steel company of its time by
appealing to the loyalty of his men through self-interest. Like Napoleon’s
soldiers, each man under him carried a potential marshal’s baton in his
knapsack. The Napoleon of Steel held dangling before the eyes of his
subordinates the hope of a partnership in the great Carnegie company as a
reward for meritorious service, and most of his later partners won their way
upward from the ranks. And the scheme worked out by the Corporation’s
management to bring about the desired harmony, to assure loyalty to the
United States Steel Corporation first and last, was modelled to some extent
on Carnegie’s method. It became known as the Stock Subscription and
Profit-Sharing Plan.
Before going into the details of the plan an example of its effects may
be illuminating. Journeying over the Corporation’s plants and mines the
author was impressed by this very spirit of loyalty and coöperation on the

part of officers and workers alike, and commented on it to William A.
McGonagle, president of the Duluth, Missabe & Northern Railroad. And
Mr. McGonagle related the following instance of this spirit of coöperation:

When we were planning the big ore concentrator at Coleraine
the engineers and other officers of the various companies concerned
were called together in consultation and certain differences of
opinion arose regarding the plans, each of the men present urging
changes which he thought would be of benefit to the company he
represented. While the discussion was at its height somebody rose
and said, “Gentlemen, it is not a question of what is best for the
Duluth, Missabe & Northern, the Oliver Iron Mining Co., or any
other company; the whole question is, what is best for the interests
of the United States Steel Corporation!” That settled it. All
differences were smoothed out and a harmonious plan quickly
agreed on.

This result was due to the plan referred to which was devised to give
each employee the stimulus of personal ownership, an incentive not
confined, as it had been formerly, to a few individuals, but distributed
throughout the organization.
The plan, as finally worked out and put into operation, was designed to
accomplish three main objects: first, to interest employees in the Steel
Corporation as a whole and not merely in the operations of the subsidiary
for which they worked; second, to give them an incentive to do everything
possible to reduce expenses and correspondingly increase profits; third, to
offer them an inducement to stay with the Corporation and identify
themselves with it.
It is with the first, or stock subscription part of the plan, that the public
is most familiar. The benefits of this are extended to all employees of the
Corporation who desire to take advantage of it. It is simply an effort to
increase their interest in the Corporation and at the same time encourage
thrift by enabling them to purchase stock at an attractive price and to pay
for it in small instalments, with the additional incentive of a bonus for
holding for a certain time the stock purchased. Usually the offering price

has been a point or two below the market, but in 1920, for the first time, the
subscription price was set slightly above it.
In effect the stock subscription plan makes for a capital-labor
partnership. It benefits both the worker and the employing company. It, in a
small way, makes the worker a capitalist himself and enables him to see
something of both sides of the case in capital and labor disputes. This plan,
and others more or less similar adopted by other companies, have done
more to bring into accord the relations between capital and labor than
thousands of sermons and theses by theoretical reformers. It is a hard-
headed, practical solution of the great problem.
The late George W. Perkins has generally been credited with the
conception and perfection of this plan. And unquestionably he had much to
do with it, and took a leading part in its consummation. He always took a
keen interest in anything that tended to better the conditions surrounding the
worker or to reduce the friction that, unfortunately, exists between capital
and labor. But, as a matter of fact, the plan was largely Judge Gary’s, as was
brought out in the testimony in the Steel dissolution suit, and—to quote
Perkins himself:
“Two men have been my especial inspiration—one of them Judge Gary,
the actual operating developer of corporation progressiveness as we have it
at its best; but he has a positive passion for doing good things and big things
behind the screen of somebody else’s personality; and credit that belongs to
him—tremendous credit—lands elsewhere. Over and over he has made me
protest against his insistence that I or another should accept applause for
accomplishment directly belonging to himself; for instance, in employees
pensions and profit sharing.”
In its application the stock subscription plan has been an unqualified
success. Particularly in recent years employees of all classes from common
labor to executives have shown eagerness to avail themselves of its terms to
acquire a personal financial interest in the big Corporation. Subscriptions
for years have far exceeded the amounts of stock offered and all over-
subscriptions have been honored. The figures of the annual subscriptions to
stock under the plan speak for themselves:

PREFERRED COMMON NO. OF
YEAR SHARES PRICE SHARES PRICE EMPLOYEES
TAKEN TAKEN SUBSCRIBING
1921 —— —— 255,308 $81.00 81,710
1920 —— —— 161,298 106.00 63,324
1919 —— —— 155,098 92.00 59,792
1918 —— —— 93,488 92.00 41,991
1917 —— —— 66,519 107.00 38,326
1916 —— —— 49,538 85.00 24,631
1915 No
offering
1914 42,687 105.00 47,346 57.00 45,928
1913 34,418 109.00 25,583 66.00 35,687
1912 30,613 110.00 30,528 65.00 36,575
1911 19,324 114.00 29,072 70.00 26,305
1910 24,679 124.00 —— —— 17,381
1909 17,953 110.00 15,380 50.00 19,116
1908 30,398 87.50 —— —— 24,527
1907 27,150 102.00 —— —— 14,163
1906 24,001 100.00 —— —— 12,192
1905 18,180 87.50 —— —— 8,494
1904 31,644 55.00 —— —— 9,912
1903 47,551 82.50 —— —— 26,399

Note: Above figures differ slightly from those given in annual
reports, a few employees having failed each year to go through with
their subscriptions.

Besides being given as much as three years to pay for stock purchased
employees who hold their stock receive an annual bonus for five years. At
first, when only preferred stock was issued, the bonus was $5.00 a year.
Later, when the common stock began to have a real investment value, this,
too, was offered with an annual bonus of $3.50. But in recent years the
investment value of the common stock still further increasing, and it having
become impossible to purchase any considerable amount of preferred stock

at a reasonable price, only the junior security has been offered employees
and the bonus on the common has been raised to $5.00 a year.
Latest figures show that there are now more than 66,000 employees and
their families interested in the plan, that is, that number are either paying for
stock or, having paid, are drawing their annual bonuses. As it is likely that
there are still more employees not now on these lists but owning stock
bought more than five years ago it seems fairly safe to assume that the
number of employees who, as stockholders, have an interest as part owners
in the great organization that they work for is not less than 70,000.
And in this number are included employees from all ranks, including
workmen, so-called office boys, elevator operators, and executives. The
plan was designed to be, and is, catholic in its scope.
Naturally, the stock subscription plan has not been regarded with favor
by those whose interests lie in fomenting dissent between capital and labor
and the plan has been attacked in many ways. One of these is the charge
that it is a money-making scheme under which the Corporation purchases
its own stock cheap and sells to the workers at a profit. As a matter of fact,
the operation of the plan is a continual source of expense to the Corporation
which has so far spent on it an aggregate of $9,160,000. It has, however,
profited from the plan in one way—increased loyalty, efficiency, and
coöperation.
Only “the men who occupy official or semi-official positions and who
are engaged in directing and managing the affairs of the Corporation and of
its several subsidiary companies” were concerned in the profit-sharing
portion of the plan, generally designated as special compensation. This was
more or less an adaptation of Carnegie’s method of rewarding his assistants
for good service, with the difference that it held out no allure of return for
effort selfishly directed, but only that done for the good of the entire
organization. It was a yearly distribution to the men above described of a
small percentage of the profits above $80,000,000, part of the bonus being
paid in cash and part in stock of the Corporation. At the time of the
promulgation of the plan it was made plain that there would be no increases
in salaries of officials. All additions to salary would come through these
bonuses, and in basing them on the profits of the Corporation and not of the

separate subsidiary companies a powerful motive for loyal and harmonious
effort for the good of the Corporation was created.
Why did not the workmen generally share in this bonus distribution? It
would have been impossible to make anything like an equitable distribution
among the employees of every class, especially in view of the fluctuating
character of a large mass of the labor employed in the industry. But the
worker with his hands did share in profits in a more definite way. His wage
was increased time and again and he received the benefits of these increases
whether profits were large or small. This was more satisfactory to him. And
in the stock subscription part of the plan, with its attached automatic bonus,
he had an equal opportunity with the men above him in authority.
But long before the Stock Subscription-Profit-Sharing Plan was
perfected steps had been taken to coördinate the work of the Corporation
and to bring about economies. First of these was the institution of a system
of comparative cost sheets immediately after the Corporation began its
existence.
The earning of profits for stockholders was the first object of the big
company, as it is in every business, and its formation had been undertaken
largely with the idea that the magnitude of its operations would make
greater economies possible, with a gain rather than a sacrifice of efficiency
and quality.
In the old steel days the calculation of costs had been more or less
haphazard, at least in most instances. Too often the entire operating expense
of steel making, from mining to the turning out of the finished product, had
been “lumped” at the end of the year, and there was no means of arriving at
the knowledge of just where profits, if there were any, were made, while if
they were non-existent or unsatisfactory it was equally out of the question
to fix the blame on any one department. Moreover, such secrets of economy
as were discovered by those in charge of a furnace or mill were rigidly
guarded as giving an advantage over competitors; all of which did not
contribute to a general high average of efficiency and economy.
The Corporation’s management first set to work to ascertain the exact
cost of running each and every mine, furnace, or other department, the costs
being tabulated for the information of the whole organization. The cost
tables were made up in the most minute detail, the blast furnace cost sheets

alone containing more than 8,000 different items, and by their aid the
several departmental superintendents could see at a glance what item in
their operations was below the average, was too costly, and could take the
necessary steps to remedy matters. These tables also created a spirit of
emulation, of friendly rivalry, between the various departmental units,
which alone was a potent incentive toward economy.
So immediate and so marked was the result of this system of cost
checking that, according to Charles M. Schwab, a saving of $4,000,000 was
effected in the blast furnace department alone in the first year of the
Corporation’s existence!
As this history does not pretend to be a technical treatise on the
manufacture of steel detailed discussion of the many ways and means
adopted by the Corporation to achieve economies would be out of place.
But some of them are particularly worthy of mention.
One example of economical methods, interesting because of the fact
that is was possible only to a company engaged in operations on a
tremendous scale, is concerned with distribution of iron ore to its furnaces.
Steel, although much alike to the uninitiated, differs greatly in quality
and suitability for different uses. The difference lies not alone in treatment
during manufacture but in the kind and character of ore used. And a plant
that has large orders for a particular kind, or analysis, of the metal, would
find itself handicapped greatly if its receipts of ore included a mixture of the
many grades often found deposited in the earth in close juxtaposition. The
right ore for the right use at the right time means better and cheaper steel.
Hence the Corporation maintains in the regions from which it receives
its ores well-equipped chemical laboratories for testing and sorting the
several varieties of ore. Probably the most important of these is at Hibbing,
Minnesota, on the line of the Duluth, Missabe & Northern.
As the long ore trains run through Hibbing small samples of the ore are
taken out of the cars and subjected to careful analysis. The trains go on their
way to Proctor where the extensive yards of the railroad are located, but
before they reach that centre the chemical analysis of the ore in different
cars has been ascertained and wired ahead, so that the cars composing the
train can be sorted and distributed in sidings in accordance with the

classification of the ores they contain. At Proctor new trains are then made
up and proceed to the ore docks at Duluth where vessels are waiting to
convey the ore to Gary, Chicago, or, by further trans-shipment, by rail to
Pittsburgh. And each ship gets the kind of ore needed at the furnace to
which it is destined.
This means not only better and more uniform quality in the finished
product; it means a saving of several hundreds of thousands of dollars
annually to the Corporation.
The Proctor yards themselves are interesting. Stretching two miles with
seventy-five miles of track and capable of accommodating 5,400 cars at one
time, as many as 469,555 fifty-ton cars of ore have passed through them in
one season destined for the Corporation’s hungry furnaces all over the
country.
Not least among the economies following in the wake of the
Corporation’s organization were the conservation effected and additional
profits earned by manufacturing into merchantable products what had
formerly been waste. The manufacture of the so-called by-products of the
steel industry had been practised in Germany for many years, and to a
limited extent in this country as well. But to get the best results not only
was a considerable outlay for new plant equipment required, but the
services of a corps of trained and experienced chemists had to be engaged.
And this meant such an expense that, especially as the whole by-product
idea was in a somewhat experimental stage, companies even of a moderate
size as steel companies go hesitated to undertake it. With the Corporation’s
vast resources, many subsidiaries, and large output the expense of
experimenting and investigating was spread out so as to be hardly felt, a
careful study of the subject was made, and necessary plants were erected.
This has borne fruit not alone in increasing profits for the Corporation and
its stockholders but in blazing a path for the steel trade of the United States
as a whole (all the larger steel companies have by-product plants to-day),
and finally in effecting an important conservation of the natural resources of
the country.
Nor, as events of the last few years have shown, have the benefits of the
developments of by-product manufacture been confined to the Corporation,
the steel trade, or even the United States. Chemicals derived from coke by-

products are necessary in modern warfare. They form the basis of high
explosives, gases, etc., and when the European war broke out the world at
large realized that Germany, in protecting and fostering her by-product
industry, had really been preparing for war. The benzol, toluol, and other
chemicals manufactured at the coke by-product plants of the Steel
Corporation and other companies in this country played an important part in
stopping the German hordes and in saving civilization.
Coke, the fuel used to make steel, is obtained, as is probably
universally known, from coal. In the old days of the trade, and to a great
extent still, the coal was burned in brick ovens with open tops, known as
bee-hive ovens, which produced about sixty tons of coke from each 100
tons of coal and blew out in smoke into the air the oils and gas contained in
the coal. Even to-day, in the great coal fields that lie near Pittsburgh, may
still be seen the dense smudge that arises in the air from thousands of these
ovens. But their day is surely, if slowly, passing. In the modern by-product
coke ovens sixty-five to eighty tons of coke are obtained from 100 tons of
coal, a gain of nearly 25 per cent. in the case of low volatile and about 8 per
cent. with high volatile coals. Nor is this saving all. The gases with their oil
content instead of being blown out into the air and burned are conducted
through pipes to an intricate apparatus where coal tar, ammonium sulphate,
a valuable fertilizing agent, ammonia, and benzol, an important base for
high explosives and dyes and also usable as fuel for motor cars, as well as
other products are extracted, and the gas itself is made available for use in
motor engines or in illuminating. More than one city to-day lights its street
with the gas from by-product coke plants.
As it requires more than one ton of coke to make a ton of steel it is
plain that the 25 per cent. saving in the amount of coke obtained from coal
by use of the modern by-product ovens means an enormous economy to the
Corporation which produces from seventeen to twenty millions of tons of
steel a year, and the saving of four to five millions of tons of coal to the
country. Nor are the profits derived from the sale of the by-products
themselves immaterial.
How profitable is the manufacture of coke by-products is indicated by
the fact that for years before the World War, and possibly even to-day, the
patentees of one by-product process were usually willing to erect a plant in
connection with a steel plant, at a cost of several millions, and to take their

pay for it from the profits of the by-products alone, handing the plant over
to the steel company at the end of a stated period. They said in effect: “You
give us the coal and we will hand you over the coke produced from it; and
in twenty years we will give you the plant.” The Corporation, however, has
always erected its by-product coke plants at its own expense.
Another important economy in its saving of both labor and material is
found in the generation, from what were formerly the waste gases of blast
furnace operations, of electric power for running the entire steel mill.
Still another by-product of the steel industry, and one that means
material profits from waste, is Portland cement. In this is utilized blast
furnace slag, formerly not merely a waste but a source of expense as it had
to be freighted away from the mills and “dumped.” The manufacture of
cement from slag had been carried on before the Steel Corporation was
formed by the Illinois Steel Co. but only in a small way. The big company
extended the cement industry as a side line to steel and erected several new
plants, the largest being at Buffington, Indiana. It now has a capacity of
about 45,000 barrels a day.
Greater earnings for the Corporation, larger profits for its stockholders,
are represented by the extension of the manufacture of these by-products.
But, beyond this, the cultivation of this part of the industry means an
appreciable reduction in the cost of manufacturing steel, and consequently
lower prices to the consumer and the possibility of higher wages to the
worker, as well as the elimination of waste and the conservation of the
natural resources of a continent.
Besides integration and the achievement of economies the early history
of the United States Steel Corporation is largely a narrative of expansion,
the building of new plants, and the acquisition of other companies. First of
these acquisitions was the purchase, consummated about a month after the
Corporation was organized, of the Bessemer Steamship Co., a Rockefeller
concern engaged in traffic on the Great Lakes and which had been closely
affiliated with the Lake Superior Iron Mines. This company had a fleet of
56 vessels (included in the number of vessels given as taken over by the
Corporation in a previous chapter). The new organization paid $8,500,000
for the stock of the company, or about $150,000 for each vessel of the fleet.

In the same year control of the Shelby Steel Tube Co., a New Jersey
company owning the principal basic patents for the manufacture of
seamless tubes, and having an outstanding capital of $5,000,000 of
preferred and $8,150,000 of common stock, was secured, the exchange of
securities being made on the basis of one share of U. S. Steel preferred for
2⅔ shares of Shelby preferred, and one share of Steel common for four
shares of Shelby common stock. Practically all the stock of the Shelby
company—$4,776,100 preferred and $8,018,000 common—was acquired,
giving the Corporation a substantial controlling interest.
In 1901 also the Corporation purchased by exchange of stock one-sixth
interest in the Oliver Iron Mining Co. and the Pittsburgh Steamship Co. The
Carnegie Steel Co. already owned the other five sixths of the securities of
both these concerns and this gave the Corporation complete ownership.
In December, 1902, an important deal for the absorption of the Union
Steel Co. was consummated. This company was a merger, effected only a
month or so previous to its absorption by the Steel Corporation, of the
Union Steel Co., a $1,000,000 concern owning a large plant for the
manufacture of wire rods, wire, and nails at Donora, Pa., and the Sharon
Steel Co., a $6,000,000 company making a similar line of products and
located at Sharon, Pa. The merged company had an authorized
capitalization of $50,000,000 and a capacity of 750,000 tons of pig iron and
850,000 tons of ingots yearly. The purchase was carried out on the
following basis: The Steel Corporation guaranteed an issue of bonds on the
Union-Sharon properties amounting to $45,000,000, of which $29,113,500
were issued to pay for the properties, $8,512,500 were purchased by the
interests controlling the properties, $3,500,000 were reserved to retire
bonds outstanding on the property of the Sharon company, and the balance
was reserved to provide for future construction and improvements. The
actual cost to the Corporation was fixed at $30,860,501, as follows: bonds
guaranteed and issued, $29,113,500; underlying bonds assumed,
$3,591,000; cash $497,990; total $33,202,490; less liquid assets taken over
with the properties, $2,341,989; net cost, $30,860,501.

Down in a Coal Mine

By this transaction the Corporation acquired five blast and twenty-four
open-hearth furnaces, two blooming and slabbing mills, four rod mills, two
wire and nail mills, one skelp works, one tube works, one plate mill, one tin
plate plant, one sheet plant, a by-product coke plant of 212 ovens, two
modern ore steamers, 4,750 acres of coking coal, 1,524 acres of steam coal,
and the ownership of two mines and leases on another two in the Mesaba
Range with an estimated ore deposit of 40,000,000 tons.

Open Pit Mining—Canisteo Mine

The absorption of this entirely solvent and “going” competitor has been
criticized on the allegation that its only purpose could have been to
strengthen the larger company’s supposed control of the industry, and to
eliminate competition. The reasons for the purchase, testified to by Judge
Gary, in the Government suit were twofold. The Union Steel Co., he said,
owned blast and open-hearth furnaces the securing of which obviated the
necessity of the Corporation building others in the same territory, which it
needed, and its wire mill was particularly well located for export business, a
prime consideration with the Steel Corporation; and perhaps a more cogent
reason was to be found in the desire of the Corporation’s management to
centre the interests of H. C. Frick in the Corporation. Mr. Frick was heavily
interested in the Union-Sharon concern and on this account, although a
director of the Corporation, he did not take a prominent part in the big
company’s affairs. His experience and ability made his full coöperation in
the directorship desirable and this had a great deal to do with the purchase.

Seventeen months later, in May, 1904, the Clairton Steel Co., which
operated three blast and fifty open-hearth furnaces, a rolling mill, billet
mill, and blooming mill at Clairton, Pa., was absorbed. The company,
controlled by the Crucible Steel Co., was then in the hands of a receiver and
its stock was acquired by the payment to the owners of $1,000,000 in U. S.
Steel bonds (bought in the open market and costing the Corporation
$813,850), and the guaranteeing of bonds to the amount of $10,230,000
outstanding against the Clairton company and its subsidiaries. The purchase
also brought to the Corporation a half interest in one ore mine and a lease of
another in the Mesaba Range, about 20,000 acres of mineral lands in the
Marquette Range, 2,644 acres of coking coal lands, and working assets of
nearly $3,000,000.
Smaller acquisitions by the Corporation in the early years of its
existence included the Troy Steel Products Co., which owned works at
Troy, N. Y., with a capacity of about 200,000 tons of slabs and skelp a year,
and the Trenton Iron Co., operating a rod mill with a capacity of some
18,000 tons. The Troy company was bought in 1902 and operated a very
short time, it having proved unprofitable.
Hardly had the United States Steel Corporation commenced operations
than the directors found themselves faced with the necessity of raising
additional working capital. The $25,000,000 cash provided by the under-
writing syndicate proved insufficient for the needs of the giant industry.
Obligations entered into by the constituent companies before the merger, it
was discovered, called for the expenditure of approximately $15,000,000,
and fully $10,000,000 was needed to refund what were classified as
“purchase money obligations.” It was also thought desirable that
expenditures should be made for improvements and additions which, it was
estimated, would increase the big company’s earning power at least
$10,000,000 a year. Furthermore, it was deemed advisable to add from
$10,000,000 to $15,000,000 to the Corporation’s fluid assets to provide for
further expansion and to strengthen reserves, as it was obvious that if the
Corporation were to need ready cash in a time of stress the amount wanted
would not be a matter of a million or so but of many millions and it would
be impossible to obtain a very large sum at such a time except at a great
loss. By increasing fluid assets the probability of the need for borrowing
would be minimized.

The issuance of $15,000,000 new preferred stock or second mortgage
bonds was discussed at length, but these courses were not favored as either,
aside from initial expense in commissions to underwriters, would have
increased fixed charges against earnings—a stock issue permanently and a
bond issue for the term of its life—while an increase in capital in either of
these two ways so shortly after the formation of the Corporation would
almost certainly have attracted unfavorable comment and might have
severely affected the value of their holdings to owners of its stock.
Eventually what was known as the Bond Conversion Plan was adopted
and promulgated. It provided for the issuance of $250,000,000 new second
mortgage bonds and the redemption of $200,000,000 of the outstanding
preferred stock, holders of the stock being given the opportunity to
subscribe for the bonds to the extent of 50 per cent. of their holdings, 40 per
cent. through deposits of stock and 10 per cent. in cash. A syndicate, headed
by the Morgan firm, was formed and guaranteed to turn in not less than
$80,000,000 in stock and $20,000,000 in cash in exchange for
$100,000,000 of the bonds to be issued. For its work the syndicate was to
receive 4 per cent. on the total value of the bonds actually issued under the
plan, the house of Morgan receiving one fifth of the commission, or four
fifths of one per cent.
An actual, though not immediate, money saving, it was pointed out,
would be effected under the plan. Although the commissions to be paid the
syndicate, $10,000,000, would be larger than in the case of either of the two
other ways suggested for raising the new capital required, the net saving in
annual interest charges would be $1,500,000, which would not only refund
the commission in a comparatively short time but would be more than
sufficient to meet sinking-fund requirements for paying off the entire
second mortgage issue when it became due, or in sixty years. The actual
gain in working capital, should the plan prove a success, would be
$40,000,000.
(Redeeming $200,000,000 of 7 per cent. preferred stock would save
dividend charges of $14,000,000 yearly, for which would be substituted a
charge of 5 per cent. on $250,000,000 bonds, or $12,500,000. The amount
required for the sinking fund would be slightly more than $1,000,000 or
less than the net annual saving. And a permanent capital reduction would be
effected at the end of sixty years.)

No other action of the Corporation’s management, it would be safe to
say, has met with such widespread disapproval as did the bond conversion
plan, much of the criticism coming from financial experts who questioned
the propriety of increasing the bonded debt of the company to so great an
extent with so small an actual gain in working capital or resources. It was
characterized as dangerous financing and it is known that not all the
Corporation’s directors were themselves in full accord with the operation.
At a meeting held on May 19, 1902, the plan was submitted to a vote of the
stockholders and here considerable opposition developed which led later to
the bringing of four suits to prevent its consummation. One of these suits
which attracted a good deal of attention was brought by J. Aspinwall
Hodge, a New York lawyer. But the Court of Errors and Appeals of New
Jersey eventually dismissed these suits and the offer to exchange stock for
the bonds—delayed by the suits—was finally made to stockholders in the
spring of 1903.
In view of the fact that its avowed object was the raising of
$40,000,000 new cash capital, said to be necessary, the plan can hardly be
said to have been an eminent success. Exclusive of the syndicate operations
only $45,200,000 of preferred stock was exchanged by stockholders for the
bonds and the cash subscriptions for the issue from the same source
amounted to the insignificant sum of $12,200. The syndicate, at its
dissolution, turned in a total of $150,000,000 in preferred stock and
$20,000,000 in cash (this, of course, included the $45,200,000 stock and
$12,200 cash of the outside stockholders), a total of $170,000,000, and
instead of the desired $40,000,000, the actual cash gain to the Corporation
from the transaction was $20,000,000 less a syndicate commission of
$6,800,000, or $13,200,000 net.
As the Corporation has been able to meet its full preferred dividend
requirements since its formation, however, it is obvious that as matters
turned out it has saved $2,000,000 a year in interest charges or in eighteen
years since elapsed $36,000,000, more than five times the commission paid
the syndicate. The yearly saving is also approximately double the
$1,010,000 which the sinking fund calls for, so that the net gain to
stockholders from the reduction of the preferred capital is $990,000 a year.
Looking into the distant future the saving after the bonds are paid off in
forty-two years will be $10,500,000 annually.

One of the criticisms hurled at the plan was that its real object was to
enable the syndicate, and especially the banking house of J. P. Morgan &
Co., to make a profit at the expense of the stockholders. The facts were that
the syndicate took a big risk of the bonds selling at less than par after
issuance, which they did, and while it is impossible to ascertain the exact
gains or losses incurred, the understanding is that Mr. Morgan and his
associates in the syndicate actually suffered a loss of something like
$8,000,000 from the deal.
It was perhaps natural that the management of the Steel Corporation, in
its early existence, should have been more or less divided against itself.
This danger was one of the factors urged by its critics against the possibility
of its success. Among its directors were Phipps, Frick, and Schwab, old
Carnegie partners, and firm believers in the Iron Master’s policy of getting
your competitor before he got you. Gary was the prominent figure in
another faction that had the foresight to perceive that a new day was
dawning in industry, an era of coöperation between manufacturer and
manufacturer, to realize that the very size of the Corporation rendered it
subject to the enmity of smaller concerns and to legal attack and public
disapproval, and that the only way of overcoming this danger was to gain
the good will of all by an open and straightforward policy. As the years
passed these differences were gradually smoothed out. The directors, as a
whole, came to see that Gary’s policy was right, in fact the only one to
pursue, and harmony was gradually brought out of the conflicting elements
and opinions.
With the passing of the years Gary gained the ascendency in
determining the courses of action of the Corporation. Always its chief
executive officer he eventually became potential. And it is a high tribute to
his judgment and foresight that all of those who disagreed with him at first
have later admitted, as did Schwab, in a published speech, “He was right
and I was wrong.”
Charles M. Schwab did not long remain as president of the
Corporation. His health broke down shortly after its formation and, in 1903,
he resigned his position and sailed for a long rest abroad, later coming back
to America to purchase control of a small independent concern and to build
up an organization of his own that to-day ranks next to United States Steel
among the steel-making companies of the United States.

At the time of Schwab’s resignation the Executive Committee was
abolished, the position of chairman of the Board created, and Gary was
elected to that office. William Ellis Corey, President of the Carnegie Steel
Co., was chosen President of the Corporation to succeed Schwab, on the
latter’s recommendation, and continued in this capacity until the end of
1910, when he resigned to be succeeded by James A. Farrell, the man who
had built up the Corporation’s export trade and who was then president of
the United States Steel Products Co.
Before the new-born Corporation had passed the first anniversary of its
birth Robert Bacon resigned as chairman of the Finance Committee and was
succeeded by George Walbridge Perkins, another Morgan partner. Mr.
Perkins continued in this office for several years, but later retired, and since
then Judge Gary has filled the offices of chairman of the Finance
Committee and chairman of the Board. He is by the Corporation’s by-laws
named “chief executive officer in general charge of the affairs of the
Corporation.”
In the first nine months of its operations the United States Steel
Corporation reported net profits of $84,779,298. After the payment of
sinking fund and interest charges on the bonded debt $61,420,304 was left
for distribution to stockholders. Dividends of 5¼ per cent. (at the annual
rate of 7 per cent.) on the preferred stock, and 3 per cent. (at the annual rate
of 4 per cent.) on the junior issue, were paid, the balance after these
disbursements, $19,414,497, being carried to surplus account.
In 1902 a gross business of $560,510,479 was done and the net profits
therefrom were $133,308,764. The year was a fairly profitable one and
although a special appropriation of $10,000,000 for new construction was
made and more than $14,000,000 was put aside for depreciation and
extraordinary replacement, the big company was able to show the full
dividends earned on its stock of both classes and a surplus balance of
$34,253,657.
The following year was one of general business depression and the
steel industry, the barometer of trade, was seriously affected. The result to
the Corporation is shown best by the simple fact that on December 30,
1903, unfilled orders on the books of the subsidiary companies aggregated
3,215,123 tons, against 5,347,253 tons a year previous. This falling off in

orders was accompanied by declining prices, and the directors of the
Corporation were impelled to reduce the quarterly dividend on the common
stock for the third quarter from 1 per cent. to one half of 1 per cent. and to
eliminate the junior dividend altogether in the final quarter. Gross sales for
the year were $536,572,871 and net profits $109,171,152, the surplus for
the period being $12,403,917.
Several changes in the make-up of the subsidiary companies occurred
in this year. The most important was the incorporation of the United States
Steel Products Export Co. (the “Export” was later dropped from the title),
headed by Farrell, to conduct the Corporation’s foreign business. The
Carnegie and National Steel companies and the American Steel Hoop Co.
were merged into one concern, known first as the National Steel Co., the
name being later changed back to the Carnegie Steel Co. Lastly, the
American Tin Plate Co. and the American Sheet Steel Co. were
consolidated as the American Sheet & Tin Plate Co.
The depression that began in 1903 lasted well into the year following
and affected earnings of the Corporation to such an extent that, for the first
and only time in its history, the wages of the men employed in the plants
were reduced. (Incidentally wages were quickly restored.) Gross sales for
the year were only $444,405,431, and net profits, $73,176,522. No special
appropriation for new construction was made and, despite the small profits,
the Corporation managed to show a surplus after the payment of the full
preferred dividend of $5,047,852.
But the wave of prosperity was returning. The first signs made
themselves felt in the late months of 1904 and the Corporation’s earnings
showed marked improvement in 1905. Gross sales amounted in value to
$585,331,736 and net profits of $119,787,658.
A surplus of $43,365,815 was reported after the preferred dividend
payment, but $26,300,000 was deducted for new construction in
contemplation so that the net amount added to surplus was $17,165,815. In
this year production reached the highest mark so far recorded by the big
company, the output of pig iron being 10,172,148 tons, of ingot steel nearly
12,000,000 tons, and of rolled products 9,226,386 tons.
In the annual report for 1905 is found the following statement by Judge
Gary: “It has been decided to construct and put into operation a new plant

to be located on the south shore of Lake Michigan, in Calumet Township,
Lake County, Indiana, and a large acreage of land has been purchased for
that purpose. It is proposed to construct a plant of the most modern
standard....”
About the time those words were being written work on the new plant
was being started and the foundations of a new city, now having a
population of 56,000, were being laid. It is appropriate that the name chosen
for this town should have been Gary, although Judge Gary had nothing to
do with the selection of the name.
All previous records for production and profits were shattered in 1906.
The betterment in steel conditions that started in 1905 continued throughout
the ensuing year, and, indeed, until the latter part of 1907, when the
disastrous panic occurred. The Corporation’s report for 1906 showed that it
had increased its capacity for pig iron production more than 63 per cent.
and its steel capacity nearly 57 per cent. between the date of its organization
and January 1, 1907, and this increase enabled it to take advantage of the
business betterment and to profit thereby. In 1906 the Corporation’s blast
furnaces poured out 11,267,377 tons of pig iron, while its steel plants
produced more than 13,500,000 tons of ingots and 10,578,000 tons of
finished material. The gross sales of the year amounted to $696,756,926,
and the net profits to $156,624,273.
These large earnings justified the resumption of dividends on the junior
stock and 2 per cent. on the issue was paid. The balance after dividends was
$62,742,860, but special appropriations for proposed expenditures on the
Gary plant and for other purposes were made, calling for $50,000,000, this
making the net carried to surplus account only $12,742,860.
Another important event of the year in the Corporation’s history was
the incorporation of the Universal Portland Cement Co., which was formed
to take over the cement plants operated by the Illinois Steel Co., and to
erect new plants for the manufacture of this profitable by-product. The
production of cement had grown from 486,357 barrels in 1902 to 2,076,000
barrels in 1906. The Universal Company immediately started work on the
erection of two new plants, one at Buffington, Indiana, within a few miles
of the Gary plant, and the other at Universal, Pa., near Pittsburgh. The
results of this enterprise have entirely justified the expectations of the

Corporation’s management, and the manufacture of the by-product has
increased until an output of 11,197,000 barrels was reached in 1913.
But the most notable event of 1906 was the negotiation of a lease by
the Corporation on the ore properties owned by the Great Northern and
Northern Pacific Railway companies. This was commonly known as the
Hill Lease.
That the Corporation would eventually make some arrangement to
secure control of the mining rights on the Hill ore properties had long been
believed in the steel trade. It was pointed out by trade authorities that the
big company did not have ore reserves commensurate with its immense
output, and the obvious conclusion was that it would not fail to secure such
reserves sooner or later. The vast properties in the Mesaba Range owned by
the railroad dominated by James J. Hill constituted, it was claimed, the only
commercially valuable supply of importance which had not yet been
appropriated by one steel company or another, so the natural conclusion
was that the Corporation must eventually attach to itself these supplies of
ore.
Negotiations leading up to the lease went on for several years before
the matter was finally brought to a head in December, 1906. The lease,
which was probably the most voluminous document of its kind ever written,
gave the Corporation the right to mine the Hill ores until exhaustion, or, at
the Corporation’s option, until January 1, 1915, the exercise of this option
being contingent upon a two-year notice to be given before that date. The
Corporation positively declined to enter into the lease unless it contained
provision for cancellation, and it later exercised this right, the directors at
the close of 1912 serving notice of their intention to abandon the lease in
two years.
Comprised in the Great Northern ore land were some of the richest and
best iron deposits in the country. Of a total area of more than 65,000 acres
owned or leased by the Hill interests, 39,296 acres with an estimated ore
content of something like half a billion tons were included in the lease to
the Great Western Mining Co., a Steel Corporation subsidiary and the
nominal lessee.
The volume of ore to be mined and the royalties to be paid were
arranged on an ascending scale. In 1907 the Western company was to take

out 750,000 tons of ore and this tonnage was to be increased by as much
again every year the lease continued up to 1917, when the tonnage to be
mined was fixed at 8,250,000 tons, at which figure it was to remain
thenceforward until the contract expired by reason of ore exhaustion.
Royalties on the ore mined were based on a price of eighty-five cents
per ton of dried ore with a metallic content of 59 per cent. for the first year
of the lease, this base price being increased by 3.4 cents a ton each year—
i.e., to 88.4 cents in 1908, 91.8 cents in 1909, etc. To this royalty was to be
added transportation charges of 80 cents a ton to the docks at Superior,
Wis., the contract providing that all the ore was to be shipped via the Great
Northern Railway. For each variation of 1 per cent. above or below the 59
per cent. metallic content, it was further stipulated, the base price was to be
increased or diminished by 4.82 cents a ton.
Critics of the Corporation have charged that the Hill lease was entered
into with a view of giving the big company a practical monopoly of the ore
reserves of the country. Those responsible for the deal have strongly
asserted that their sole object was to ensure an adequate ore reserve for the
future. The question resolves itself into one of motives and is therefore not
susceptible of proof. But whatever were the motives of the Steel
Corporation’s management the fact remains that, according to the opinions
of the best-qualified experts outside the Corporation itself, the big company,
at the time the lease was made, did not have a supply of ore such as its vast
output demanded, and probably does not now have such a necessary supply
although it has acquired large reserves in Cuba and elsewhere. Further, it is
doubtful if, outside of the Hill holdings, a large enough reserve of
commercially available ore is to be obtained in the United States.
The claim that the royalties paid under the Hill lease were too high is
supported by the undisputed fact that royalties paid on other ore deposits in
the same territory at the time of the signing of the contract were much lower
than those paid under the lease by the Corporation. Unusual conditions
governed this transaction, however. The lessors were well aware of the
Corporation’s need of ore and that they were probably the only ones in a
position to fill this need. They were therefore able to drive a hard bargain.
The price originally demanded by Mr. Hill and his associates, it is
understood, was one dollar a ton and it took some years’ negotiations before
a price which both parties to the matter would accept could be arrived at.

What was the reason for the cancellation of the lease? It is generally
thought that the directors of the Corporation were impelled to their decision
by the report of Commissioner of Corporations Herbert Knox Smith, who
conducted a searching investigation into the Corporation’s activities and
severely criticized the lease, and by the fear that it would be made much of
by the Federal Government in its suit for the dissolution of the “Steel
Trust.” This suit, it is true, had not actually been filed when the lease was
abandoned; but it was so imminent that the Corporation’s directors must
have believed it was about to be instigated. And these considerations did
have weight in bringing about the decision. But the more cogent reason was
a purely business one—the lease had not proved as profitable as had been
hoped. The iron content of the Hill ores had not measured up to
expectations, the cost of concentrating the ore proved too high, and on the
whole the deal had become rather a burden than otherwise to the lessee.
Up to the end of 1906 the United States Steel Corporation had spent
more than $200,000,000 in the acquisition of new properties, the
construction of new plants and the extension of old. Its productive capacity
had been increased enormously. Its plants were now in excellent shape, its
organization in perfect working order. Prices were high and it had, at the
close of the year, nearly 8,500,000 tons of business on its books. Its early
difficulties were past and it seemed about to enter into the heyday of its
prosperity.

CHAPTER IV

THE TENNESSEE PURCHASE

O
n the events of the year 1907 the United States Steel Corporation
must, to a certain extent, stand or fall at the bar of public
judgment. This was the year of the panic and of the Tennessee
Coal, Iron & Railroad purchase.

The panic, enemies of the Corporation have asserted, was precipitated
by the big “trust” by the immoral use of its immense financial resources to
enable it to “gobble up” the properties of the Tennessee company, a
competitor said to have been making big inroads into the business of the
larger concern and which it had therefore become necessary either to
destroy or absorb.
The friends of the Corporation, on the other hand, are emphatic in
asseverating that the competition offered by the Tennessee company was
not such as to cause anxiety to the management of the Steel Corporation,
that it was not a very valuable property, and that the Corporation purchased
its stock only upon solicitation by the interests controlling the company and
their assurance that a refusal to do so would result in the failure of an
important security house, which would add greatly to the severity and
danger of the panic. They claim further that the price paid was more than
the actual value of the stock and that, far from using any advantage it may
have had to squeeze the smaller concern, the “Steel Trust,” against the
better judgment of its management and with the single purpose of
alleviating the panic dangers, paid for the securities it took over something
like 60 per cent. more than good business practice seemed to warrant.

If the claims of the first are correct and the Corporation did use its
power to force a competitor to the wall, regardless of the fact that in so
doing it was bringing misery and calamity to the ninety millions of people
of the United States, this act alone must be more than sufficient to convict it
on a more serious charge than “monopoly in restraint of trade”—of high
treason and betrayal of the trust which big business, willy nilly, undertakes.
But if the Corporation, through its directors, put the national welfare before
all other considerations this, conversely, should prejudice public opinion,
properly informed, in its favor. And this is why the year was by far the most
important epoch in the Corporation’s history and its events are worthy of
careful consideration.
After a careful search made by the writer through all the evidence
submitted by the Government to this end in its suit against the big company,
he failed to find one iota of evidence which connected the Corporation with
the panic or upheld the charge that it conspired to force the Tennessee
stockholders to sell. A man who had been a member of the syndicate that
controlled the fortunes of the Tennessee company before it was absorbed
and who, if the allegations referred to are correct, was one of those who
suffered at the Corporation’s hands, in reply to the question: “Did the Steel
Corporation use its power to create the panic of 1907 so as to gain
possession of the Tennessee stock?” replied: “Absurd. The charge is
baseless—except in politics. The sale of the Tennessee company was an
incident arising in the course of the panic, not a cause. The Corporation was
offered a chance to get what I consider a valuable property and seized it.
But let me tell you,” he added, “the Corporation did not get the property
cheap.”
And the Supreme Court, in its opinion, said on this subject:
“There is, however, an important circumstance in connection with that
of the Tennessee Company which is worthy to be noted. It was submitted to
President Roosevelt and he gave it his approval. His approval, of course,
did not make it legal, but it gives assurance of its legality, and we know
from his earnestness in the public welfare he would have approved of
nothing that had even a tendency to its detriment. And he testified he was
not deceived and that he believed that ‘the Tennessee Coal and Iron people
had a property which was almost worthless in their hands, nearly worthless
to them, nearly worthless to the communities in which it was situated, and

entirely worthless to any financial institution that had the securities the
minute that any panic came, and that the only way to give value to it was to
put it in the hands of people whose possession of it would be a guarantee
that there was value to it.’ Such being the emergency it seems like an
extreme accusation to say that the Corporation which relieved it, and,
perhaps, rescued the company and the communities dependent upon it from
disaster, was urged by unworthy motives.”

Mine Stables

The Tennessee Coal, Iron & Railroad Co. was a reorganization of an
earlier concern of the same name located in Alabama. The reorganization
brought into control of the company new and powerful interests, and these
spent a good deal of money in improving the plants, so that, about the
beginning of 1907, it was pointed to as a probable important competitor of
the Corporation. It was also considered as the nucleus for a possible merger
of the steel-making concerns of the South such as would be able to cut
severely into the Corporation’s business. Not long before the panic broke

the company secured an order from the railroads controlled by the late E. H.
Harriman for 150,000 tons of steel rails and it was supposed by some that
the loss of this order had caused considerable worriment to the heads of the
Steel Corporation—which doubtless it did. Then came the panic, and when
its dust cleared away the Tennessee company was a subsidiary of the “Steel
Trust.” The sequence has served to lend plausibility to the charges made
against the Corporation in connection with the purchase. But a full recital of
the events bearing on the deal tends to throw a different light on the matter,
and an attempt to set down the more important of these details will be made
here.

Modern Coal Mining by Machinery

Emphasis has been laid on the Harriman order, particularly because the
Tennessee company had contracted to supply the lines controlled by the
great railroad magnate with the new open-hearth steel rail, then coming into
popular favor with the railroad experts and which to-day are used almost
exclusively by the larger transportation systems. It has been alleged that the

Corporation was very desirous of adding to its properties the plants making
this new kind of steel rail and getting immediate control of their
manufacture. The facts are that the southern company did not make a pure
open-hearth rail, its steel being made by a combination of the Bessemer and
open-hearth processes, and the Corporation at the time was engaged in
building its new plant at Gary, a plant which was to include a large rail mill
to make open-hearth rails exclusively. When the Corporation took charge of
the Tennessee properties it was found that the company’s rail mill was being
operated at a loss of nearly $4 a ton. Further, a very large percentage of the
rails which had been supplied the Harriman roads before the transfer of the
properties proved defective and the new management had to bear the loss of
replacing these.
It is unnecessary and futile, in this brief chapter, to go fully into the
story of the panic of 1907, or of the events that preceded it. Suffice it to say
that the panic followed a period of enormous expansion and of extension of
credit eventually carried to a point where business overreached itself and, in
a country lacking an elastic currency system, such as the United States then
was, financial stringency was bound to follow. The first rumblings of the
coming storm went unheeded, and it was not until late in the year that there
was any realization of the desperate state of affairs. Then one big trust
company closed its doors and was followed by others. Banks stopped specie
payments, stocks tumbled headlong on the exchanges of the country,
industry halted, throwing thousands out of employment, and the financial
hurricane swept over the country, leaving ruin in its wake and making its
effects felt over the whole world.
While the panic came like a thunderclap to the average citizen, without
warning, the big bankers had seen the danger threatening and had made an
effort to prevent any occurrence which might precipitate matters. In the
latter part of October rumors gained circulation that the Knickerbocker
Trust Co., one of the leading financial institutions of New York City, was in
trouble and the late J. Pierpont Morgan, who had assumed the leadership of
the country’s bankers in the crisis, and others had an examination made of
the company’s affairs with a view to rendering it assistance. Apparently the
result of this investigation was unsatisfactory. Anyway, the Knickerbocker
Trust Co. was abandoned to its fate and, at fifteen minutes to one, on

October 22nd, closed its doors after a sensational run, many stock exchange
firms being overwhelmed in the crash.
Thus did the panic storm break. Rumors of trouble in connection with
other institutions then came thick and fast, and one concern, the Trust Co.
of America, was especially talked of. This institution had a capital of
$2,000,000 and resources of $74,000,000, including $12,000,000 cash in its
vaults at the time. Under normal conditions it was perfectly solvent and able
to meet its depositors’ claims, but that it was not in a position to withstand a
prolonged run was proved by subsequent events. Realizing that the failure
of the Trust Co. of America would make the crisis far more acute Mr.
Morgan and his associates resolved to come to its assistance, provided it
could prove that its statements of condition were correct.
Meanwhile, George Cortelyou, Secretary of the United States Treasury,
had hurried on to New York from Washington and on the night of the 22nd
he held a conference at the Hotel Manhattan with Morgan, George W.
Perkins, one of his partners, James Stillman, and Henry P. Davison of the
National City Bank, and others. After the conference, which lasted over the
greater part of the evening, Perkins and Davison adjourned to the Union
League Club, where they were met by Oakleigh Thorne, president of the
Trust Co. of America, who had been summoned by telephone.
These were strenuous days for bankers. No coming downtown late and
leaving early. The confab at the club started at nearly midnight and lasted
until long after. Thorne made a statement of the financial condition of his
company and the others promised that, if the facts were as represented, he
would be assisted. No time was to be lost. Perkins immediately arranged for
the examination and Thorne was at his desk at half-past six on the morning
of the 23rd. By seven the examiners were at work.
But the newspapers were on the watch, and the fact that the Trust Co.
of America was in need of assistance was known and discussed over the
breakfast tables of New York, and, in fact, of the country. By the time the
company opened its doors that day there was a clamorous mob outside,
each individual seeking to save himself before the crash came, and the
crowd surged through the doors and up to the paying teller’s window,
demanding its money.

In vain did the officers of the company put seven tellers to work instead
of the usual one, in vain were all deposits paid promptly and unhesitatingly.
Denser and denser grew the crowd of depositors, and it became obvious that
the millions that had been passed over the counters in the morning hours
would not suffice to stem the tide. Thorne hurried over to the Morgan
offices and there succeeded in obtaining $2,500,000 immediately. This loan
was subsequently augmented by another of $10,000,000 made a few days
later, and a third of $15,000,000 made early in November.
On this one day, October 23rd, $13,500,000 was paid out over the trust
company’s counters! But this was not enough to stem the run which
continued for more than a week and did not abate until, so far as can be
estimated, something between $30,000,000 and $35,000,000 was paid to
depositors.
But the Trust Co. of America was saved. It has been claimed that the
price of its salvation was the surrender by its president of some 5,500 shares
of Tennessee Coal, Iron & Railroad stock which he owned. It seems plain,
however, that the suggestion that the Steel Corporation should take over the
control of the Tennessee company came first from the people who had the
majority stock of the company and after the beginning of November, before
which time the bankers, headed by Morgan, had loaned the trust company
$12,500,000 without any mention of or question regarding the stock. It also
appears that the transfer of Thorne’s stock to the Corporation had no
connection whatsoever with the trust company’s difficulties and its
extrication therefrom, but was part of a separate and distinct transaction.
Particular attention has been given here to the affairs of the Trust Co. of
America, because of the allegations connecting the help rendered the
company with the Tennessee purchase. But it really constituted only a small
part of the situation with which Morgan and his fellow-bankers were faced.
There were many others that needed help, banking institutions, investment
houses, brokers, and so on. The whole financial community had turned to
Morgan as its Joshua to lead it out of the desert. Upon his shoulders fell the
burden of saving the country from financial ruin.
The Morgan library became as the headquarters of an army. Here were
congregated at all hours of the day and night bankers, brokers, business
men of all kinds, both those who needed help and those who could assist the

banker in the work he had thrust upon him and the arduous duties which he
had assumed. Men rushed in and out of that library, pleaded for help,
begged for information and, awaiting their turn, slept in its luxurious chairs.
The task that Morgan and his associates had undertaken was one of
exceedingly great difficulty. Despite all that had been done to dam the
torrent of financial disruption and the fact that each weak spot was
strengthened as soon as discovered, the banker knew that his herculean
efforts might be brought to nothing by one big failure which would let loose
the panic fears it was sought to allay. Hence it may be imagined with what
consternation the financier received the news, brought to him by Lewis
Cass Ledyard, a prominent lawyer and a close friend of his, that Moore &
Schley, one of the leading brokerage firms in the “Street,” was in serious
difficulties and needed several millions of dollars to save it from disaster.
Moore & Schley was deeply mixed up with the affairs of the Tennessee
Coal, Iron & Railroad Co. One of the members of the firm was a member of
the syndicate that controlled the company, and Tennessee stock constituted
a considerable proportion of the collateral which it had put up to secure
loans for itself and its customers. This stock, considered good collateral in
normal times, failed to find favor with the bankers to whom Moore &
Schley was heavily committed in the time of stress, and the brokers were
called on to replace the securities with others of a more approved character
—which they were unable to do—or to suffer the calling of their loans and
consequent bankruptcy.
Only two courses were open to the brokers, either to borrow a sum
large enough to meet their loans or to negotiate an exchange of the
Tennessee stock for some other security which the banks would accept.
They chose the latter and, realizing that the United States Steel Corporation
was the only possible buyer of the Tennessee stock, approached Morgan
through Ledyard to that end.
Suggestions that the Steel Corporation should purchase control of the
Tennessee properties had been made in the past to the Corporation interests
by one or more of the directors of the southern company. It does not appear,
however, that these suggestions were authorized by the Tennessee syndicate
as a whole. Be that as it may, they came to naught, as the directors in
question seemed to have a very high idea of the value of the Tennessee

stock, and the divergence of opinion on this question between them and the
possible purchasers was so great that no middle ground was possible. Never
did the tentative offers to sell reach a point where they were worthy of the
term “negotiations.”
One of the reasons alleged for the Steel Corporation’s supposed fear of
the Tennessee company’s competition was that the company was the
potential basis for a merger of the steel concerns in the South which would
not only be strong enough to offer a stubborn fight to the “trust” for
business in the section below the Mason and Dixon line, but would have a
distinct advantage over it in exporting steel to Mexico and Central and
South America.
John A. Topping, head of the Tennessee Coal, Iron & Railroad Co. and
of the Republic Iron & Steel Co.—dominated by the same interests—had
actually taken steps for the establishment of a market on the Gulf coast. In
the Rivers and Harbors Act of 1899 the construction of locks and dams and
other improvements on the Warrior River so as to give slack water
communication between Birmingham, Ala., near which city the mills of the
Tennessee company were situated, and Mobile, was decided on. But the
matter rested there until Topping, by his efforts, secured an appropriation to
carry out the improvements, since completed. Not only would the water
route have been important to the Tennessee company in regard to the
markets mentioned, but it would have enabled the company to enter the
markets on the northern Atlantic coast of the United States, from which it
had been debarred by the high rail freight rates.
Reports that a steel merger in the South was contemplated or actually
under way had been circulated from time to time. The three companies
mentioned as constituting the consolidation were the Tennessee Coal, Iron
& Railroad Co., the Republic Iron & Steel Co., and the Sloss Sheffield Steel
& Iron Co. Other less important concerns were also suggested. The Sloss
Sheffield company was engaged entirely in the manufacture of iron and was
a rather small concern as compared with the steel giants of the day. But it
was conservatively capitalized and managed and had at the time an
unbroken dividend record in respect to its preferred stock. At its head was
Colonel J. C. Maben, a veteran iron maker and one of the best known and
most respected figures in the industry. Colonel Maben was approached by
one of the Tennessee directors with a merger proposition, but refused to

consider it because, as he has since said, he did not think the financial
condition of the Tennessee company sound. If there had ever been any
possibility of the merger going through Colonel Maben’s attitude would
have effectually stopped it.
From this it would appear that the proposal to merge all the larger steel
and iron companies of the South never developed beyond the nebulous
stage. However, a consolidation of the two largest of these concerns, the
Tennessee and the Republic companies, had been definitely decided on. The
two concerns were controlled by the same financial interests and their
managements were practically identical. While it is not unlikely that some
of the directors of the companies, among whom were John Warne, or “Bet
You a Million” Gates, looked upon their investment therein first and
foremost as a speculation and would, in consequence, have regarded
favorably the opportunity to sell out at a fair figure, there were others who
had implicit belief in the possibilities for the expansion of the steel industry
in that section and considered that they had in their hands the opportunity to
build up a southern steel empire. The amalgamation of the two companies,
naturally, would have been the first step to this end, and, as has been stated,
it had been decided on and its consummation was being delayed only until
what seemed to be a favorable time should arrive. But their dream of
empire was doomed to disappointment.
Another reason advanced for the Steel Corporation’s supposed anxiety
to get its clutches on the Tennessee Coal, Iron & Railroad Co. was that the
latter concern owned ore mines estimated to contain some three quarters of
a billion tons of iron ore, besides coal resources placed at two billion tons,
as well as limestone and other raw materials necessary in the manufacture
of steel. The company also enjoyed the undoubted advantage of having both
its coal and iron in the ground within a twenty-five-mile radius of its ovens
and furnaces—it was “sitting on its raw material”—whereas the steel mills
in the North were great distances from their raw supplies—Pittsburgh, for
instance, depending for its ore on the vast iron ranges of northern
Minnesota.
The proximity of its mines is, of course, a material advantage to the
Southern company, as transportation charges on raw material play a very
important part in the cost of steel making. It is perhaps not so generally
known that this advantage is to a large extent counterbalanced in other

ways. Were it not for the saving thus gained it is questionable whether it
would be possible to manufacture steel commercially in the South.
In the Hill lease the price which the Steel Corporation was to pay on
the ore taken out of the Great Northern holdings in the Mesaba region was
based on an iron content of 59 per cent. Northern ore averages well over 50
per cent. metallic content and that yielding much under 50 per cent. is not
considered commercially available, although some of the lower grade ore is
treated by a concentrating process and made so. Moreover, much of the ore
of the Great Lakes region lies in immense bodies within a few feet of the
earth’s surface and is mined by the simple process of removing the top layer
of soil—technically known as stripping—and then putting a steam shovel to
work.
But the ore beds from which the Tennessee company draws its raw
supplies average well under 40 per cent. in iron, actually from 36 per cent.
to 37 per cent.; nor does the ore lie near the surface, and the process of
making it into iron and steel is necessarily more tedious and more costly
than is the case with the richer and more easily reached northern iron.
In the first place, more labor is required, particularly in winning the raw
materials, as the coal fields are badly disturbed geologically, making the
expense of mining very much higher. And the ore is nearly all hard ore,
requiring to be drilled, blasted, and crushed. Further, the low iron content
requires the use of about one and three quarter times as much ore per ton of
pig iron, and the poor quality of the Alabama ore necessitates the use of
about half as much again of coke to make a ton of iron as compared with
that coming from the Lake Superior district.
The high phosphorous content of southern pig iron prevents the use of
the cheaper Bessemer process which is used on the low phosphorous pig
iron of the northern district and the fact that no Bessemer steel industry
exists in the South to furnish the scrap required in the straight open-hearth
process prevents the economical use of this process in the South, a
disadvantage which does not exist in the North, where scrap is available.
Hence it is advisable in the Birmingham district to use a combination of the
two processes, the iron being first bessemerized, then worked through the
open-hearth furnace. And this adds greatly to the cost of converting a ton of
pig iron into steel.

Another difficult problem with which the Tennessee company had to
contend was that of labor. The large majority of the common labor supply in
the South is made up of negro labor and, while the colored man often makes
a satisfactory worker if properly “bossed,” he is unreliable and too often has
as his motto “never do to-day what you can put off until to-morrow.” Given
assurance of enough to eat for a day or two and a dollar in his pocket, he is
likely to refuse to work until again urged by the spur of necessity—
childlike, his vision of the future is limited. And this disposition to take life
from day to day is, to put it mildly, trying to the manufacturer who needs a
full force to get out tonnage.
And even when the negro is reliable he is seldom fitted to take
positions of responsibility, so that workmen must be brought from the North
to undertake the skilled work or that requiring managerial ability. And as
the opportunities for such men are greater in the North, the keeping of an
efficient organization together means a constant struggle on the part of the
manufacturer, becomes an ever-present and pressing problem.
The expansion of the steel industry in the South is further limited by
the fact that it is an agricultural, not an industrial, section. A steel mill does
not, in the main, make products to be sold direct to the ultimate consumer.
Its output must be manufactured by other companies into machinery,
locomotives, and a thousand and one other things. Its customers are other
industries, and there are comparatively few industries in the South. Thus it
would seem that the formation of a great southern steel merger or the
expansion of the Tennessee company to a size sufficiently large to cause
apprehension to the “Steel Trust” was a very remote contingency.
It might not be out of place here to point to the significance of the fact
that the Republic Iron & Steel Co., which owns important tracts of ore and
coal lands in the South just as conveniently situated to its furnaces as are
the Tennessee’s holdings, has not made marked use of the supposed
advantages which it obtained from its southern properties. The company’s
expansion since 1907, under John A. Topping’s able management, has been
great, but it has been almost entirely in the North.
These things, the conditions that surrounded and influenced steel
making in Alabama, were well known in the steel trade. Therefore it was
hardly to be wondered at that when Ledyard, through Morgan, suggested to

the directors of the Steel Corporation that the controlling interest in the
Tennessee company should be purchased by its bigger and richer rival, the
proposal was not enthusiastically received. The deal, for any other reason
than the saving of the financial situation, was opposed by both Gary and
Frick. The latter, in particular, seemed to think that almost any other course
was to be preferred to an absorption of the Tennessee company, and it was
he who suggested that a loan of $5,000,000 be proffered Moore & Schley to
save them from bankruptcy. But the members of the firm rejected this offer.
It was not a time for delays, for dickering. The financial situation was a
seething volcano which might erupt at any minute. From Friday, November
1st, when Ledyard first presented the matter to the banker, meetings of the
Steel Corporation’s finance committee and conferences between Gary and
Frick and representatives of Moore & Schley were held almost
continuously until Sunday, November 3rd, on which date the Steel
Corporation management finally yielded to the insistence of the brokers and
agreed to purchase the controlling stock of the Tennessee Coal, Iron &
Railroad Co. at par, or $100 a share, about twice the value that had been set
on the stock by Gary in his earlier talks with Ledyard.
Followed the now famous visit to Washington. The deal, though
practically completed on Sunday, was not formally closed. Gary insisted
that the President of the United States should be consulted and that his
attitude should be ascertained, and Frick demanded and received an
assurance from Morgan that every assistance possible would be rendered
other companies which were in difficulties before the purchase should be
consummated.
At midnight Sunday a special train left Jersey City bearing the two
Steel Corporation directors and they were delivered at the national capital
shortly after daybreak Monday. Theodore Roosevelt, then President, was
breakfasting when the two arrived at the White House, but he gave them
immediate audience and to him the steel men explained the situation and
asked whether the Government would be antagonistic to the absorption of
the southern company. Gary, who was spokesman, told the President that he
and his associates realized that the deal might be used as a handle to attack
the Corporation for attempted monopoly—prophetic words—that they were
only considering the purchase because of the strained financial situation
which it would tend to alleviate, and finally that the taking over of the

Tennessee properties would still leave the big company with less than a 60
per cent. control of the country’s steel trade. This percentage, Gary
explained, was the limit which the Corporation had set for itself and was
one, incidentally, from which it was gradually receding, its percentage of
the steel production of the United States having shown an almost
uninterrupted decrease from year to year.
With President Roosevelt at the interview were his private Secretary,
William Loeb, afterward Collector of Customs of New York, and Elihu
Root, Secretary of State. The President consulted with the head of the State
Department and decided that it was not in his province to give formal
approval to such a transaction. He nevertheless gave satisfactory assurance
to Gary and Frick that the Federal Government would put no obstacle in the
way of the completion of the transaction. These views Mr. Roosevelt later
repeated in a letter to Attorney-General Bonaparte.
No sooner was Gary satisfied as to the President’s attitude than he
informed Morgan by long distance—a ’phone having been kept open in
readiness—of the course of the interview, and the banker announced to the
financial interests of New York that the Steel Corporation had arranged to
purchase control of the Tennessee Coal, Iron & Railroad Co.
That memorable morning, Monday, November 4th, had dawned dark
and gloomy for the financial world for which Wall Street is the nerve
centre, but no sooner had Morgan’s announcement become known than, as
Mr. Morgan often stated, a marked change toward a more optimistic
sentiment, a genuine improvement in the situation, became apparent.
Immediately on the return of the two steel directors to New York the
purchase was completed, Moore & Schley turning over to the Corporation
157,700 shares of common stock of the Tennessee Coal, Iron & Railroad
Co. and receiving therefor $18,774,000 in second mortgage bonds of the
Corporation, it having been agreed that the stock was to be paid for at par,
in bonds at a market value of 84. Other common stockholders of the
Tennessee company were offered the same terms, and the Corporation has
since acquired all but $68,092.50 of the outstanding common stock of the
southern company; $72,500 preferred stock and $123,100 guaranteed
preferred is still held outside the Corporation.

George G. Crawford, manager of the plants of the National Tube Co. at
McKeesport, was appointed president of the Tennessee Coal, Iron &
Railroad Co. under the new management. Crawford accepted somewhat
hesitatingly at first, knowing that a great deal of money was required before
it would be possible to put the company on a satisfactory earning basis.
Indeed, he had previously refused to consider an offer of the position of
manager under the former control. Under his guidance the company did
rather better than expected and by about the end of its second year as a
“Steel Trust” subsidiary was showing a small profit. All earnings, however,
were put back into extensions and betterments, as was also a large amount
of cash supplied by the controlling Corporation, and it was not until the
year 1914 that the first dividend on the common stock, 1 per cent., was
declared.
By that time the expenditures made by the Corporation in extending the
Tennessee properties and enhancing their earning power had begun to show
visible results, and when the enormous war demand for steel started to
make itself felt early in 1915, the southern company was in a position to
take full advantage of it and to reap large profits therefrom.
The Corporation does not make public the operating results of its
separate subsidiaries, hence it is impossible to more than guess at the
probable earning power of the Tennessee company. But there is reason to
believe that its future operations will justify the expenditures of the
Corporation, both for purchasing and improving its plants—that the
investment will prove a paying one.

CHAPTER V

MEN WHO MADE UNITED STATES STEEL

Elbert H. Gary

A
year or so before these words were written the big office buildings
and apartment houses of New York City were tied up by a strike
of elevator operators. The Empire Building, at 71 Broadway,
purchased shortly before the strike by the Steel Corporation, however, was
not affected. Every man was at his post. And it was perhaps the only big
building in the city that showed no sign of the strike.

A newspaper man, visiting the building, asked one of the starters the
reason, and he was told:
“As soon as the Corporation bought this building our wages were
raised. We are getting as much as or more than the unions are demanding.
Judge Gary has treated us white. And you can just bet your life we are
going to stick by him, strike or no strike!”
This is only a little incident. But it serves to illustrate the most
important characteristic of the head of United States Steel: His sense of
justice, the supreme passion of his life. Judge Gary treats everyone “white.”
Judge Gary is not a “glad hand artist.” He is, if anything, too reserved,
and hence he does not win popularity quickly with chance acquaintances.
But those who know him intimately or have business dealings with him
admire, sometimes even reverence him, for they know he not only preaches
but practises in every relation of his life the square deal, and when there is

any question of what is fair between himself and another, leans over
backward and gives the other the advantage.
In the pages of this history the Steel Corporation’s policy of “the square
deal” to all has been emphasized time and again. It is the Corporation’s
policy because it was first Gary’s. He impressed it on the Corporation,
sometimes after a hard fight. To-day it is the foremost policy of the big
company as it is the guiding spirit of Gary’s life.
Elbert H. Gary, chief executive officer of the United States Steel
Corporation, was born on his father’s farm near Wheaton, Illinois. He was
descended from old New England stock on one side, his father, Erastus
Gary, having sprung from the hardy Puritans who settled in Massachusetts,
while his mother, Abiah Vallette Gary, was a descendant of one of the
daring spirits who sailed from France as an officer in the Army of LaFayette
and fought with him for the freedom of the American colonies.
The future head of the greatest industrial organization in the world was
brought up frugally. He was full of spirits and fond of play, but his Puritan
father was a believer in the discipline of hard work, and the youthful Elbert
had little time except for his lessons and for work on the farm. “My father
didn’t believe much in play,” he once remarked to the writer; “we boys had
our choice of working or studying, and the time was divided about equally
between the two during each year.” But although Erastus Gary may have
been stern and uncompromising he was obviously also a fond and kindly
parent. Asked what had been the dominating influence of his life, Judge
Gary replied: “My parents. Whatever worth while I may have done I owe to
their teaching and example.”

Bee-hive Coke Ovens

When Gary was fourteen the Civil War broke out. The story is told that
the news came to the farm one evening that the Union had been attacked
and Erastus Gary and his boys sat around the fire discussing the situation
and what their course of action should be. But their mother had no such
doubts. Walking to the fireplace the old lady took therefrom a rifle and
handed it without a word to her eldest son.

Mouth of Coal Mine—Coke Ovens in
Background

The Judge himself remembers nothing of the incident and it may be a
fabrication pure and simple. However this may be, the fact is that soon after
the young Elbert ran away from home and joined the Union ranks. He never
had the desired opportunity to fight for the Union as his father discovered

his whereabouts—this was probably not difficult as he knew the boy’s spirit
—and got him sent back home.
Among the friends of the elder Gary, and frequent visitors at the
Wheaton farm, were Col. Henry F. Vallette, an uncle, and Judge Hiram H.
Cody, members of the Illinois bar and of the firm of Vallette and Cody, of
Naperville, a neighboring town. They had both noticed Elbert Gary’s ability
and studious habits, and when the boy was about eighteen years of age
Vallette one day asked him: “Elbert, how would you like to become a
lawyer?”
Needless to say Gary did not wait to be asked twice. He entered the
firm’s office in 1865 and while working there began to read law. Later he
took a regular course in a law school at Chicago and was soon admitted to
the bar of his state, where his success was rapid and pronounced. In course
of time he became Judge of Du Page County and was admitted to the bar of
the Supreme Court of the United States.
Meanwhile, he had formed, with his brother Noah and one of his
former chiefs, the firm of Gary, Cody & Gary.
Gary became one of the leaders of the Chicago bar, and his ability in
handling difficult cases soon attracted to him a number of wealthy clients,
among whom were several large corporations, and it was through his
connections with one of these corporations that he eventually connected
himself exclusively with the steel industry, in which he has since risen to be
the most important figure.
In 1898 Gary, as general counsel for and a director of the Illinois Steel
Co., was called on to take charge of the organization of the Federal Steel
Co., a merger of the Illinois and other companies. It was he who first
suggested this amalgamation. Here he was for the first time brought in
touch with the late J. Pierpont Morgan, whose financial assistance in the
formation of the new company was being sought. The business ability of
the lawyer so impressed the New York banker that he and others interested
with him insisted that Gary should head Federal Steel. The future head of
United States Steel hesitated, for his practice was lucrative and he had
become financially independent, but he finally yielded and gave up his legal
business, then located at Chicago, and moved to New York, devoting
himself thenceforward entirely to steel.

Speaking of the reasons for Morgan’s choice in this matter an old
business associate of the Judge’s said: “Legal judgment and business
acumen are seldom found in combination. Gary had both these qualities and
a higher degree than any man I have ever known. And it was this happy
combination that impressed the great banker.”
But more than this, Gary was, and is, a statesman in business. He has
the broad vision that distinguishes the statesman from the mere politician
and the really great business leader from the average run of executives. He
saw beyond immediate effects into the distant future and based his course
on this vision.
In writing of the vast majority of men who have achieved success in
one line or another it is easy to select some prominent characteristic which
particularly distinguishes them. But there are a few who owe their eminence
to a variety of well-blended attributes, and Gary is one of these chosen few.
This renders it difficult for the chronicler to decide where the heaviest stress
should be laid.
A prominent Chicago lawyer who in his youth had worked for years
under Gary was appealed to in this regard. And this is what he said:
“Judge Gary had the ability and courage to, whenever necessary,
abandon the old precedents which, by reason of changed times and
conditions, had been relegated to the scrap heap of progress. He was one of
the few attorneys who could, with almost prophetic vision, see the positions
which the courts of appeal must eventually be obliged to take with
reference to questions of public policy and the great industrial organizations
just then in their infancy.”
The lawyer then went on to tell an anecdote illustrating the fact that the
Judge though a member of the legal profession did not believe in recourse
to litigation when it could be avoided. He said:
“I recall that on one occasion a client called on the Judge in an irate
mood and asserted his intention of prosecuting a neighbor for slander. He
told Gary what the neighbor had said and asked his opinion and advice. And
this was the reply he received: ‘If you are guilty of what he charges perhaps
you had better sue; but if you are not—why, go home and forget it.’”

Nor did Gary’s prophetic vision “extend only as regards the position
which the courts must take” but to the trend of human events generally.
There is nothing uncanny about this foresight or sixth sense. It is due
entirely to the fact that its possessor has a mind peculiarly capable of
estimating and sizing up the relative values of known causes and deducting
from them the natural, in fact, the inevitable results.
No better exemplification of this can be given than is afforded by the
policies which he advocated for the Corporation, and which were gradually
adopted and put into practice. He saw plainly, long before any one else did,
how subject to criticism was the gigantic organization which he had helped
to form, and of which he was the head; he realized that its very size
contained an element of weakness in that it attracted enmity, and made it the
subject of attack.
And in the face of powerful opposition, not only from some of his
fellow directors at first—an opposition that gradually diminished and
eventually vanished, or was converted into admiration and hearty
coöperation—but from subordinate executives of the subsidiary companies
who could not accustom themselves immediately to new business methods,
he insisted that the big company should so deal with all with whom it came
in contact, its competitors, its customers, its workmen, as to make all of
these its friends.
Such a consummation was regarded in the beginning as an
impracticable dream by nearly everyone of his colleagues, who could not
realize that a new industrial era was dawning, but Gary persisted and won
out.
The good will he gained for the Corporation from those who otherwise
would have been its enemies proved a strong bulwark of defence in the
Government’s suit for the dissolution of the “Steel Trust.” Had Gary’s early
recommendations on questions of policy been overruled by his associates it
is a moral certainty that the Corporation would have been dissolved instead
of emerging victorious from the suit. It is difficult to see how any one who
had the opportunity to listen to or read the evidence presented in this
litigation could fail to have been impressed with the fact that Gary seemed
to have anticipated every possible point of attack and to have taken steps to
eliminate, or at least to minimize, the danger therefrom. Whatever may have

been the differences of opinion in the beginning, for many years the policies
advocated by Judge Gary have been endorsed by all of his fellow-directors
on the Steel Corporation’s Board; particularly by the members of the
Finance Committee, who were more closely associated with him, had a
better opportunity of absorbing his viewpoint, and who stood behind him
solidly in carrying out his ideas. Gary himself was emphatic on this point in
his testimony in the Government suit.
The part played by Gary in bringing about the formation of the U. S.
Steel Corporation and in guiding its policies was clearly brought out by the
late Robert Bacon, one of the partners in the firm of J. P. Morgan & Co., in
his testimony in the suit in question. Mr. Bacon, speaking of the
organization of the big company, said: “Judge Gary, of course, directed it
all.” And later, in discussing the policies of the Corporation:
“The facts are that the policy of the company from the beginning has
been to change the old methods of dealing with competitors. Judge Gary,
who has done more for the U. S. Steel Corporation in its development and
the benefits it has brought all hands than any one man since its formation,
has made it a cardinal point of his policy, and has tried his best to inculcate
it upon all the sub-companies, that there was a new order of things come,
that there were new rules of the game dealing with competitors, as well as
in other human relations. Judge Gary has talked from the very first and has
tried to compel the actions of all the others in the Corporation toward
dealing fairly and decently with competitors, as being the only way in
which any kind of stability of prices or of conditions could be maintained.
He has from the beginning preached and practised the fairest kind of
dealing with his competitors, keeping them informed, as far as he
legitimately could, of all the conditions of the Steel Corporation, and by
doing so has gradually acquired a degree of confidence that, in my opinion,
has never existed before amongst competitors. The old conditions have
changed; the old destructive and ruinous and ruthless warfare of the early
days of the iron and steel industry has disappeared, and in its place, by
reason of the attitude of Judge Gary, more than any one else, a condition
has been produced among competitors in the iron and steel business, and I
believe in many other industries, that never before existed.”
Judge Gary’s intense desire for doing justice to all, and his sincere
interest in the well-being of the worker, have already been referred to. He is

not a reformer in the ordinarily accepted sense of the term. He does not
prate about helping the working man, but in guiding the big Corporation he
has always seen to it that the man who labors shall be given an opportunity
for clean living and self-respect. And it is significant that in arranging wage
increases the Corporation has always provided more generously for the
lower-paid employee. As a mass, the men who work for the Corporation
recognize Judge Gary’s attitude and appreciate it fully. And he sets a higher
valuation on this recognition and appreciation than on all the honors that
have come to him.
Some years ago Gary, in urging on the subsidiary companies the
promotion of safety and welfare work for the Corporation’s employees, said
to the casualty managers of the different subsidiary companies: “We (the
Finance Committee) shall not hesitate to make the necessary appropriations
of money to carry into effect every suggestion that seems to be practicable
for the improvement of conditions at our mills.” Later he wrote, repeating
his former promise that all needed money would be forthcoming and
saying: “The safety and welfare of the workmen is of the greatest concern.”
This promise has been kept sacredly. The writer has visited at one time
or another practically all the Corporation’s plants—some of them several
times. At each one he has always asked those who devote themselves to
welfare work this question: “Have you any difficulty in getting
appropriations from the Corporation for welfare work you consider
advisable?” And the reply has invariably been the same: “We are never
refused.”
In the vast organization that is the United States Steel Corporation there
are perhaps hundreds of thousands of men who have never set eyes upon its
head, who have no idea what he is like to look upon. But there is probably
hardly a man who does not feel his influence, and there are few who do not
look up to him with respect and often with something like reverence. His
personality has permeated this huge mass of men.
Another attribute of this great business leader is a broad and real
tolerance of the opinions of those who do not agree with him. He has built
up a vast and wonderfully efficient organization founded on what he
conceives to be principles of justice and fair dealing, but his attitude toward
those who criticize the structure he has erected is not one of irritation, as

might be expected, or of impatience. Rather he endeavors, sincerely and
patiently, to disarm criticism by a policy of open dealing.
On one occasion, when certain acts of his had been criticized as
constituting a possible violation of the law, he, although believing implicitly
that he had not offended, forthwith abandoned the continuance of these acts,
so as to leave no shadow of doubt of his intent to obey the law. He
explained at the time that though every citizen had the right to criticize
legislation, and should seek to have changed such laws as he deemed unjust
or uneconomic, he was bound to obey these laws so long as they remained
on the statute books.
In physical stature Judge Gary is of medium height. He carries his
years well and appears yet in his prime. The impression he gives the
observer is that of a statesman rather than a man of affairs, an impression
heightened by his deliberate speech and his appreciation of the finer
meanings of words. Most of his portraits represent him sitting straight up,
just a little stiffly, but when interested in a conversation, the Judge
invariably stands, or rather paces deliberately back and forth, his hands
stuck in the waistband of his trousers, and his head bent forward at an angle
of deep thought. And as he warms to his subject, he now and then
gesticulates slightly, or, turning to his listener, drives home some argument
with pointed forefinger. At the remembrance of some amusing incident his
twinkling eyes light up what is usually a decidedly serious countenance.
All those who during the World War were in touch with what was being
done by the Government to meet the enormous new manufacturing needs
created by the war know that the Steel Corporation, in the great emergency,
invariably put patriotism above profits and that its hearty coöperation
helped materially in bringing about the desired end. Judge Gary was
responsible for the Corporation’s attitude in this as in other matters.
Honors have been showered upon the head of the Steel Corporation by
universities and colleges, and the American, French, Belgian, and Italian
governments, and the late Pope Pius X presented a gold medal containing
his profile portrait to Judge Gary in recognition of his efforts for improving
working conditions. But beyond all these honors he values the esteem of the
men under him, and the good will of his competitors.

It would be hard to find a more suitable ending for this brief study of
the leading figure in the industrial world than the quotation applied to him
by the principal steel makers of the United States and Canada on the
occasion of a dinner given in his honor in October, 1909. Here were men
who had fought with him and against him, who had had every opportunity
to estimate him both as friend and foe, and who, after the trying times of the
1907 panic, declared that he had “played the game and played it fair”:
“Moderate, resolute, whole in himself, a common good.”

John Pierpont Morgan

“The greatest banker the world has ever seen.” Thus the head of the
Deutsche Bank called the late J. P. Morgan during his lifetime, and as the
years pass students of finance are becoming more and more satisfied that
the German, himself a banker of no mean repute or ability, spoke truly.
Without J. Pierpont Morgan the organization of the United States Steel
Corporation would, in all probability, have been an impossibility. The
carrying through of so vast a project required a financier of his prestige and
of his financial courage. There was no other banker big enough or bold
enough to undertake such a task, and no history of the Corporation would
be complete unless it contained a résumé of the work of the former money
wizard.
So large did Morgan loom in the public eye during his lifetime and so
much has been said and written of him since that it would be difficult to say
anything of him with which the reader is not already familiar. But it has
perhaps not been generally realized that Morgan was a patriot of the right
type. He was, to use a financial term, “a bull on America.” His confidence
in his country’s future was unbounded, and he had the courage of his
convictions to put his great fortune into the development of American
enterprises.
John Pierpont Morgan was the son of Junius Spencer and Juliet
Morgan. He was born on April 17, 1837, and educated at the English High
School of Boston and the University of Gottingen. He entered the banking
business at the age of twenty, with the firm of Duncan, Sherman & Co., and

later, from 1864 to 1871, was a member of the banking house of Dabney,
Morgan & Co. Still later he helped to form the firm of Morgan, Drexel &
Co., which afterward became J. P. Morgan & Co. He died in Rome within a
few weeks of the close of his 76th year, on March 31, 1913.
Having a peculiar genius for financial organization and arriving at the
heyday of his power at the period when vast consolidations of capital and
industry were the order of the day it was natural that he should have figured
prominently in the carrying through of many of these. Among the large
concerns with the organization of which he was closely identified was the
International Harvester Co., and he took a prominent part in the
reorganization and refinancing of several large railroad enterprises, notably
the Erie, Reading, Santa Fe, and Northern Pacific. He has generally been
blamed for the New Haven débâcle and there is no doubt that he occupied
an important position in managing its affairs; in fact, according to the
former president of that system, he dictated its policies and actions.
But the financing of the United States Steel Corporation was beyond all
question his magnum opus.
So great was Morgan’s influence in the management of most of the
companies with which he was connected that it was said of him, as of the
McGregor, that “where he sat was the head of the table.”
But so far as the Steel Corporation was concerned at least, it seems to
be fairly well established that, keen as was his interest and great as was his
pride in the big company, he never assumed an attitude in the least
dictatorial. He was the Corporation’s banker—nothing more. Questions of
operation and policy he left entirely to those having direct charge of them.
This was particularly true in the last six or eight years of his life, by which
time, other directors of the Corporation have stated, he had come to place
such implicit reliance on the judgment of Judge Gary that he always
accepted the latter’s ideas upon all matters connected with the welfare of
the great enterprise.
Morgan himself regarded the amalgamation of many of the country’s
leading steel concerns into United States Steel as the crowning achievement
of his career. He took a personal pride in his connection with the
Corporation’s organization—and who shall say it was not a worthy pride?
He lived to see it firmly established and exerting an influence for good on

the steel trade and on industry generally; to see it gain the confidence of the
public as evidenced by the growth that was, even before his death, taking
place in the number of its stockholders, many of whom held only a share or
two and regarded them almost as gold bonds; to see it earn the good will of
its competitors and the loyalty of its—at the time—two hundred thousand
odd employees.
But unfortunately he also lived to see it attacked by the Government.
No doubt this was a sore grief to the great financier. And its vindication did
not come until several years after his death.
To those who knew him by sight only Morgan appeared a solitary, stern
figure, perhaps a little too much inclined toward impressing his own will on
others. Those who enjoyed intimacy with him declare that under his cold
exterior beat a heart as tender as a woman’s, that he took the keenest
interest in all things human and that, while never figuring publicly as a
philanthropist, the list of his private benefactions was enormous.
Newspaper men, who perforce had often to seek an interview with the
great banker, found him rather unapproachable. But when he consented to
talk his statements could be relied on absolutely. And he was not without a
subtle sense of humor. On one occasion a financial writer who had been
assigned to get Morgan to talk by hook or by crook invaded his private
yacht and was only saved from being ejected by the banker himself who
invited his visitor to the saloon and treated him like an honored guest.
He discussed in the fullest detail the subject on which the writer wished
to interview him but—at the end, when his self-invited guest was taking his
leave, Morgan said with a shadow of a smile:
“Of course, you understand all I have told you is in confidence. You
have been my guest and I rely on you not to violate that confidence.”
Needless to say the interview was never printed. The scribe reported to
his office that the banker refused to be interviewed.
When Morgan died the leading business men of the country united in
testifying to his ability and character. Judge Gary, who had been closely
associated with him for years, said:
“As a constructive force in financial matters he had no equal. With
keenest perception, with indomitable courage, and with unbounded

confidence in the future he was a natural leader and as such was called upon
in times of financial stress to lend his influence to avert a threatened storm
or to overcome an existing difficulty. And he never failed. His character was
such that the greatest men of this country and of other countries trusted him
and followed his lead.”
Shortly before he last sailed from his home shores Morgan remarked to
a friend that his work was done. The utterance was prophetic. And posterity
is beginning to realize how great that work was. In these difficult days of
world reconstruction, more than ever before, is his financial genius and
particularly his faith and courage missed.

Charles M. Schwab

Perhaps of no other man in industry are as many anecdotes related as of
Charles M. Schwab, the first president of the United States Steel
Corporation, and now head of the Bethlehem Steel Corporation, the second
largest steel organization in America.
Schwab is the Peter Pan of American industry. His is the spirit of
perennial youth, his the philosophy of laughter.
“I try,” he says, “to be like Schulz. He was a foreman under me during
the Homestead strike. He stuck by the company and one day came into my
office dripping mud and water. To my inquiries he replied that some strikers
had thrown him into the creek.
“‘What did you do then, Schulz?’ I asked.
“‘Oh, I shust laff.’”
One of the old Carnegie “boys,” Schwab is like the former iron master
in his wonderful ability to infuse into those who work with him some of the
enthusiasm with which he is so richly endowed, and to get from them
loyalty and devotion. To this attribute, as much as to anything else, Schwab
owes his great success.
It is impossible to get an accurate concept of Schwab’s personality
without coming directly into contact with him. Many men have declared

that “C. M.,” as he is known to his friends, is “the best salesman that ever
stepped in shoe leather.” And this is not an exaggeration. There is
something about him—fascination, personal magnetism, call it what you
will—that captivates almost everyone with whom he comes in contact. His
infectious laugh disarms hostility and criticism. His great ability compels
admiration.
Numerous anecdotes illustrating Schwab’s magnetism are told in the
steel trade; the following is typical:
Several years ago, when Bethlehem Steel was a little known company,
its head visited a prominent New York banker to seek his aid in putting out
a bond issue. He told the banker all about the great future in store for
Bethlehem as he saw it—prophetically, as it has turned out—and his hearer
was fired with enthusiasm regarding the proposed issue. He asked Schwab
to go back to his office and dictate to a stenographer the statements he had
made regarding the security behind the bonds and the future of Bethlehem
Steel for the purpose of making up a prospectus. With that, he declared, the
bonds would sell like hot cakes.
When the banker received the typewritten prospectus he was
dissatisfied and rang Schwab up on the ’phone. The steel man’s arguments
were not nearly so convincing in black and white as when given in his
inimitable style, and the money magnate declared that the other had not
included in the written statement the facts related in the conversation. So
Schwab paid him another visit and went all over the matter again. The
banker said:
“Yes. You’ve got it all down here. But it doesn’t sound the same. I tell
you what we’ll do. You talk the bonds into a phonograph and we’ll use the
records to sell them.”
And here is another Schwab anecdote told by himself:
“On one occasion, when Bethlehem was still a struggling company, I
went to see a Philadelphia banker whom I knew very well and told him I
needed a great deal of money. He said:
“‘I can let you have half a million.’
“‘Why,’ I replied, ‘I can get at least a million from bankers in New
York who don’t even know me!’

“‘That’s the reason they lend you,’ he gravely returned.”
Charles M. Schwab was born at Williamsburg, Pa., on February 18,
1862, and educated at St. Francis College at Loretto in the same state. His
father owned a livery stable at Cresson Springs, where Carnegie had a
summer bungalow.
One day the little Scotsman, who loved music, heard the boy singing,
and told Schwab, Senior, to bring the lad to him when he was ready to go to
work. At the age of eighteen Schwab entered the employment of the
Carnegie Company as a junior in the drafting room.
Schwab attributes his success largely to the interest which Carnegie
took in him. Carnegie, on the other hand, declared that Schwab was one of
the two men to whom he owed the bulk of his fortune, the other being
Captain William R. Jones, who was superintendent of the big Braddock
plant when Schwab enlisted in the steel army.
At the age of twenty-four Schwab was appointed superintendent of the
Homestead plant, which had just been acquired by Carnegie. When he
arrived there, the organization was in a terrible condition. The long series of
strikes which the original owners had had to contend with had not only
caused them to give up the plant in despair and to accept Carnegie’s offer,
but had resulted in bitter feeling on the part of the workmen. But Schwab’s
smile and good nature soon won them over, and in a few months the
organization had been restored and Homestead was making money for
Carnegie.
In 1889 Schwab returned to Braddock on the death of Captain Jones, as
his successor. Three years later occurred the bloody strike at Homestead,
and Schwab was again sent back there to take charge. When the strike was
over he was put in charge of both plants. He was the only man that ever
managed two plants for Carnegie.
One day Carnegie told Schwab that it had been decided to make him
vice-president of the Carnegie Company. But the young man replied:
“No, Mr. Carnegie, I am no good at carrying out another man’s orders,
and that’s about all a vice-president has to do. As superintendent I am boss
of the plants I manage; I prefer to remain that way.”

Next day Carnegie again sought out his superintendent. “Well, if you
won’t be vice-president, I suppose we’ll have to make you president,” he
said, and so he did.
Like Gary, Schwab was satisfied that the next step in steel making, one
that must come sooner or later, was the integration of the different
departments of steel making into one big, harmonious whole. How he
assisted in making this possible we have already seen. In 1901, on the
organization of the United States Steel Corporation, Schwab became its
president, with a salary of $100,000 a year and about $15,000,000 of its
stock.
After the Corporation had taken over Carnegie Steel, Morgan, the story
goes, found a contract among its papers pledging Schwab a salary of
$1,000,000 a year. He had not been aware of the existence of this contract
and asked Schwab what could be arranged on the matter. Schwab replied:
“Let me have that paper a second, Mr. Morgan,” and taking it from the
banker, he tore it into small pieces and threw them into the wastebasket.
But Schwab did not long remain president of the great steel merger.
Long accustomed to being “boss” he found the new conditions
disagreeable. Bred in the old steel school he was out of sympathy with the
policies of the Corporation as inaugurated by Gary. There was no open
breach between them, but the situation was obviously galling to the younger
man and so he resigned, his resignation probably being hastened by the fact
that he had been for some time in poor health, a victim of neuritis.
It was in 1903 that Schwab severed his connection with the Steel
Corporation and sailed for Europe intending, at the time, to give up
business permanently. But this was not to be.
Although he returned from Europe in 1904 Schwab did not actively
engage in business again until 1907. He was, in a sense, pitchforked back
into the manufacturing arena by the failure of the United States
Shipbuilding Co. a year or two before and its reorganization as the
Bethlehem Steel Corporation. Schwab, who had been the principal
bondholder of the shipbuilding company, became the controlling interest in
the reorganization and eventually assumed personal charge of its activities
to protect his own investment as well as that of others.

Once in harness again Schwab threw himself heart and soul into the
steel battle. He found Bethlehem Steel in a rundown condition and for years
he poured into it his personal fortune and all the money he could borrow.
Although himself the largest stockholder he steadfastly refused to consider
dividends until the company was firmly established financially and the
result was that, before the European war broke out, Bethlehem was solidly
on its feet and showing large earnings. These were enormously enhanced
during the war years, when the stock sold as high as $700 a share. To-day
Bethlehem is the second biggest steel company in the world, its plants
having a capacity of 3,250,000 tons of steel annually.
Although for many years a competitor of the Corporation of which he
was once president Schwab is still a firm believer in the future of United
States Steel and the value of its securities. On one occasion he told the
writer:
“It is a wonderful concern. There isn’t anything like it in the world, nor
could its plants and organization be duplicated at any cost. The future will
show how well, how securely, its foundations were laid.”

George W. Perkins

George Walbridge Perkins, chairman of the Finance Committee of the
United States Steel Corporation from November, 1901, to February, 1907,
and an active member of that committee and of the Corporation’s
directorate till the day of his death, June 18, 1920, was an unusual figure in
American business—a man who, working his way from the bottom of the
ladder to an eminent position while still comparatively young, gave up
active money making while still under fifty and devoted his life to the
betterment of social conditions.
The world does not know how to judge Perkins. There are many who
believed that his withdrawal from active business and his self-submergence
in social work was a cloak, and this belief was undoubtedly strengthened by
the fact that Perkins, in appearance, was a typical, cold-blooded financier.
His was neither the look nor the manner of an idealist, a reformer. But the
record of his life from 1911, when he resigned from a partnership in the

great House of Morgan, is ample answer to all doubts of his sincerity.
Perkins’ friends and admirers can point with confidence to this record in the
impartial court of history.
Perkins was born at Chicago in January, 1862. He began his business
career in the humblest capacity, that of office boy, in the branch of the New
York Life Insurance Co. in his home town. Later he became bookkeeper,
then solicitor, manager of agencies and, still later, vice-president. Finally,
when only thirty-eight, he was elected chairman of the Finance Committee
of the company.
Perkins was one of the first exponents of corporate publicity. He saw its
virtues when publicity to most corporation men was anathema. When vice-
president of New York Life he urged that the best way to earn the
confidence of the public was to give it your own, and he prevailed upon the
trustees of the New York Life to publish annually a full list of the securities
in which the policyholders’ money was invested. This innovation was
heralded with a storm of ridicule by the managements of competing
concerns. But so powerful a means of getting new business did these
security lists prove, so great was the increase of insurance written by the
agents armed with them, that other insurance companies were soon forced
to follow, and the practice became general in the insurance world.
Perkins’ next step was to extend the business of his company to
European fields previously closed to all American insurance concerns,
which, in fact, were not permitted to operate in many European countries
because of the unenviable reputation they bore. Perkins was determined that
New York Life should lift these legislative handicaps and do business
anywhere and everywhere it wanted to and so he made one trip after the
other to Europe, each time extending his company’s field of operations.
What he said in effect to the various European governments was: “The New
York Life is ready to meet any reasonable demand for the safeguarding of
the interests of its policyholders,” and he backed up his assertion. The result
was not only to give the company a bigger field abroad but to strengthen the
arguments of its agents at home.
This achievement and the fact that he was instrumental in bringing to
America the first Russian loan ever placed here, brought Perkins to the
notice of New York financiers. Early in 1901 he called on the elder Morgan

seeking a subscription to the Palisades Park project, one of Perkins’ pet
hobbies until the day of his death and a project that has enabled thousands
of poor children from the New York slums to get a chance for fresh air and
outdoor enjoyment. Morgan, on his second meeting with the insurance man,
pointed in his usual abrupt manner to a desk near his own:
“How would you like to occupy that?” he asked.
At first Perkins refused, but later accepted, and he became a partner in
Morgan’s in 1901, continuing with the great banking house until 1911.
Soon after the Steel Corporation was organized Perkins was elected a
member of the Board of Directors, and later, on the resignation of Robert
Bacon, became chairman of the Finance Committee. His experience with
the New York Life had peculiarly fitted him for the position he now held,
for Perkins was first and last an organizer—a worker with men, not with
money. Although a member of the largest private banking house of the
country he was not a banker. “In the ten years I was with Morgan’s I never
went behind the counter or examined into the bookkeeping end of the
business,” he declared; “my job was to assist in the physical organization of
the great industrial combines which Mr. Morgan was then engaged in
financing.”
Like Gary, head of the Steel Corporation, Perkins looked rather to the
ultimate results of an action or a policy than to its immediate effects. Like
Gary, moreover, he was a believer in corporation publicity and in the square
deal to the worker, so it was natural that he should have favored these ideas
in the Corporation. Perkins at the beginning, it is true, did not fully endorse
all Gary’s policies but he early became an ardent supporter of them, and his
assistance in the turbulent early years was a great help to the Judge in his
efforts to have his policies endorsed by the Corporation’s board.
Perkins was particularly identified with the Corporation’s bond
conversion plan, explained in an earlier chapter. It was largely his idea.
When the subject of raising more working capital came up after the
organization of the big company it was he who suggested the scheme by
which the cost of securing the new capital needed would be paid back in a
few years by savings in interest charges, one which would also eventually
reduce the Corporation’s fixed charges materially. He believed that the
Corporation should build for the future and that it was a matter of small

moment if the immediate cost of a course of action was high if the ultimate
results were toward economy. And when the plan was opposed in the courts
by some of the stockholders it was an affidavit presented by Perkins that did
more than anything else to induce a favorable decision and to make it
possible to proceed with the conversion.
In 1911 Perkins retired from the Morgan firm, at the same time retiring
from all active business except his directorship in various companies, chief
among which were the Steel Corporation and the International Harvester
Co., of which latter he was chairman of the Finance Committee. After that
time he devoted his energies until his death to semi-public work.
Especially did he devote himself to the solution of the problems
growing out of the relationship between capital and labor. He was
prominent in the profit-sharing plan which is now in vogue in the Steel
Corporation and which has been so largely followed by many other
industrial concerns in the past seventeen years. He also gave much of his
time to spreading the gospel of coöperation in the business world. As long
ago as February, 1908, he began making public addresses on the necessity
for such coöperation, claiming that the many modern improvements in
inter-communication and the enlightenment of the people through our broad
system of education had brought us to a point where the old destructive,
competitive methods in business had to be abandoned and a more humane
and enlightened order of things take their place. He delivered many
addresses throughout the country on these two favorite themes, profit-
sharing and coöperation.
As already suggested Perkins’ course in breaking off his business
career apparently at its zenith and devoting the prime of his life to the
betterment of the lot of the worker with his hands and the general welfare of
the community was regarded with suspicion by many, and his motives were
questioned. Of the influence that guided his course let him speak for
himself.
“My father,” he said, “was deeply interested in social service and
settlement work, and, as a boy, my Sundays were spent not in merely going
to Sunday-school but in rounding up the poor boys of the neighborhood for
classes, etc. Later, my experience selling life insurance brought me closely
in touch with the needs of the people, and even when I became affiliated

with the Morgan firm my work as an organizer was the human end of the
job. My inheritance from my father and my own life work both kept me in
touch with “all things human.” Isn’t it only natural that I should take a deep
interest in what you might call human work?
“I don’t claim credit for this. In fact, I don’t see how, with my
experience, it could have been otherwise. It became, if you will, my hobby
which I gratified as soon as I was able to.
“When a man approaches fifty years of age and finds he has enough
money to meet his wants for the rest of his life and to take care of those for
whom he should naturally provide, the question that presents itself is: what
am I going to do with the remainder of my life? Whatever I do in the way of
work will have to be left behind me in the world. Shall I work to
accumulate more money and leave that, or shall I work for certain definite
objects that I believe are worth while, and leave the results of that work
behind me? I simply chose the latter course.”

Other “Men of the Corporation”

Many other men, of course, have done their share in making the
Corporation what it is to-day. In the success of the great company men like
Richard Trimble, its secretary, and William J. Filbert, its comptroller, who
have been with it since incorporation and seem almost as integral parts of
its structure as Judge Gary himself, have done their part, as have the
presidents of the various subsidiary companies. All these are men of
unusually high ability, nearly all of whom have worked their way to their
present positions from the bottom of the ladder. They have for years
devoted all their energies to building up, each in his own sphere, the
business and resources of the big company and may justly and proudly
claim the right to be reckoned with Gary, Morgan, and the others, as “Men
who made United States Steel.”

CHAPTER VI

DEVELOPING WORLD MARKETS

U
ntil the year 1914 American industry had been self-sufficient. Our
manufacturers made goods for home consumption, our bankers
concerned themselves only, or almost so, with American finance,
and, broadly speaking, the world outside was of comparatively small
importance in our business affairs. With the war this situation changed. The
British navy stood as an impassable barrier between Germany and her
customers abroad. England and France were devoting the mass of their man
power to fighting or the production of the wherewithal for fighting, and the
neutral, non-producing nations had only one market to turn to. They came
to the United States for all their wants of manufactured goods, and in so
doing brought home to the American manufacturer the real importance of
these vast markets he had previously neglected.

Some of our more far-sighted manufacturers, however, had long sensed
the value of this foreign commerce. They realized that the day would come,
sooner or later, when this country would produce a surplus of manufactured
goods above her own needs, and that if she was to be prosperous she must
find customers outside for this over-production. They realized, too, that
these markets must be assiduously cultivated against the time when they
would be necessary for the continuation of our prosperity.
And among those who took this far-sighted view was the management
of the United States Steel Corporation.
In the office of James A. Farrell, president of the Corporation, at 71
Broadway, New York, stands a pedestal supporting a great globe. It is a
fitting ornament for that office, for the business of the great steel company

extends to practically every part of the known world, literally “from China
to Peru”; fitting, also, because Farrell’s name is indissolubly connected with
the development and extension of that business in the markets of the world.
When the idea of a big steel combine was first conceived by Judge
Gary, one of the chief considerations in his mind was that such a vast
organization, and such an organization alone, would be able to offer battle
to the manufacturers of the other great steel-producing nations—Great
Britain, Germany, and Belgium—which were then practically without let or
hindrance, dividing between them the markets of the world. The same
thought was forcibly brought out by Charles M. Schwab at the Simmons
dinner, and was one of the most powerful factors in influencing J. Pierpont
Morgan to undertake the financing of the giant steel merger.
Properly speaking, the development of the Corporation’s export trade
did not begin until about two years after the big company was formed.
Questions of internal organization were naturally paramount in the
Corporation’s infancy, and the first few years were taken up with problems
nearer home—physical organization, coördination, integration, efficiency,
economies, in a word, the welding into a harmonious whole of the corporate
organization and properties merged. Therefore, it was not until the early
part of 1903, when internal problems had been gotten out of the way, that
the question of securing export business on a more systematic and
profitable basis was actively considered and steps taken toward the
formation of an organization with a definite export plan and policy. To do
this, it was necessary to bring together, to consolidate, the export offices
and organizations of the several subsidiary companies which had until that
time been maintained on a practically independent basis. This was done by
creating a new company, the United States Steel Products Export Co. (the
“Export” was later dropped from the title), late in 1903. The first organized
efforts of the Corporation to obtain export business may thus be said to
have begun with the calendar year 1904.
How beneficial was the coördination of the export trade of the various
constituent companies into one selling agency is forcibly illustrated by the
fact that the cost of doing export business has been reduced from about 8
per cent. of gross, which it was when each company sold independently, to
something under 1 per cent. in recent years. As the Corporation’s foreign
sales in the past few years have averaged more than $160,000,000, this has

meant an annual saving of between $11,000,000 and $12,000,000, or nearly
a half year’s dividends on its preferred stock. The lower selling cost also
meant that the position of the Corporation bidding against foreign
competition has been improved, and to that factor must be attributed largely
the increase in the Corporation’s export business.
The choice for the presidency of a new export organization fell upon
James A. Farrell. He was suggested and his appointment advocated by the
chairman. He was the man fitted preëminently for the job and his selection
was more or less inevitable. It is generally recognized that no individual in
the steel industry possessed so wide a knowledge of the extent, character,
and requirements of world markets as he does. In 1903, when he became
president of the Corporation’s new export subsidiary, the country’s foreign
trade in iron and steel was a little more than 300,000 tons. In 1917 it was
6,268,514 tons.
For many years, during which there had been little disposition on the
part of American steel makers seriously to cultivate markets abroad,
Farrell’s entire time and energy had been devoted to that end. A man with
the genius that is “an infinite capacity for taking pains,” he had developed a
thorough knowledge of competitive conditions affecting steel in every part
of the world where the metal was used. He had become, and still is, a
walking encyclopedia on all matters relating to the exportation of steel,
carrying in his head details of freight rates, steamship facilities, duties, and
so on, at and between all important and many unimportant points. His
facility in reeling off from memory these facts and figures, as displayed
when he was called as a witness for the defence in the Federal suit since
dismissed by the Supreme Court for the dissolution of the Steel
Corporation, earned him the soubriquet of “the man with a head full of
figures,” a not inept title.
And indeed, no more striking exposition of the wide scope of the
export market for steel made in America which has been developed within
the past sixteen years has ever been given than was embraced in his
testimony on the occasion mentioned. His statement which, incidentally,
consumed nine days, was a remarkable story of business achievement. He
showed that the exports of the Corporation were of a variety as
miscellaneously wide as was their distribution, ranging from cotton ties for
Egypt to highway bridges for Iceland; from wire products for the Holy

Land to light rails and pipes for the diamond mines of the Transvaal; from
galvanized sheets for the houses of the Borneo natives to the steel skeleton
work for some of Buenos Aires’ large and beautiful buildings; in fact,
everything made of steel was shipped “from Greenland’s icy mountains to
India’s coral strand.”
Farrell is one of the men of which the steel trade furnishes so many
examples, men who have worked their way up from the foot of the ladder to
the highest places in the industrial and commercial world. Born at New
Haven, Conn., on February 15, 1863, he started his working career as a
laborer in a wire mill in his home town while yet in his teens—at the age of
fifteen and a half. But it was not long before he was doing skilled work, and
from this it was, for Farrell, an easy step to a more responsible position.
While he had made good in the shops Farrell’s ability ran rather to the
selling than to the manufacturing end of the industry. He was a merchant, a
salesman, above all things, and he was soon given an opportunity to prove
his ability in this line when he was sent on the road for the Pittsburgh Wire
Co., with which concern he had become connected. Later, when that
company was absorbed by the American Steel & Wire Co., Farrell won his
way to the sales managership. His success there was pronounced, and when
the company decided to enter the foreign field, he was offered, and
accepted, leadership in the new venture. When the Steel Corporation later
took over the American Steel & Wire Co., Farrell acted as foreign sales
agent for the big merger, and finally, as already stated, became the first
president of the Steel Products Co.
How satisfactorily he filled this position was shown by his selection by
Judge Gary later as president of the parent corporation. Farrell’s elevation
to the presidency of the United States Steel Corporation took place in
January, 1911.
Farrell deserves to be reckoned, along with Gary, Morgan, Perkins, and
Schwab, as one of “the men who made United States Steel.” Although
occupying a comparatively unimportant position at the time of the birth of
the Corporation his connection with it has lasted throughout its history and
for the past ten years he has had general oversight of the manufacturing and
selling operations.

Although no longer in direct charge of the management of the Steel
Products Co., Farrell still takes a keen and personal interest in all that
concerns the structure of the foreign business which he helped so materially
to erect. He is in close and constant touch with all its export activities, and
keeps himself as thoroughly informed of developments affecting world
trade in steel as he did when his whole time was devoted to that end of the
business.
Quiet and unassuming, Farrell bears a name for thoroughness and
efficiency. He throws himself wholeheartedly into his work, giving it
absolute loyalty and untiring energy. He was at one time characterized as
“the man who never rested” and there was some reason for the
characterization. In times of stress his working day is fourteen hours or
longer. But he has a splendid physique and a constitution apparently of the
steel in which he deals.
At first glance Farrell impresses the observer as “pure business.” His
manner suggests impatience of waste of time or language, and he seldom
makes even an unnecessary gesture. In appearance he typifies the cold,
unsentimental, even hard, business man. But his looks do him an injustice
for he is, if one is fortunate enough to pierce beneath the surface, a man of
broad sympathies and rare delicacy and tact.
Farrell was succeeded as head of the Steel Products Co. by Eugene P.
Thomas, who since 1906 had assisted him in building up that company’s
world business. Thomas was born in Atlanta, Ga., on May 11, 1876. He
began as a newspaperman, but after a brief experience in that profession
entered the steel trade. He was one of the pioneers of foreign trade in steel,
having gone to England as a salesman for the company with which he was
then connected, Lorain Steel, in 1899. Before he had attained his thirty-fifth
year he was head of the greatest export organization in the United States.
As already explained, American steel manufacturers had made little
systematic or sustained effort to capture foreign trade prior to the
organization of United States Steel. Such campaigns for world business as
had been undertaken had not been conducted, as a rule, in such a manner as
to give the steel maker of this country a good name abroad. The people of
the steel-consuming countries—as distinct from those producing their own

steel—preferred to deal with German, British, or Belgian mills, and for
obvious reasons.
The great steel-producing countries of the old world, under normal
peace conditions, are unable to consume more than a comparatively small
proportion of the output of their mills; internal or home consumption is
small. Hence, the exportation of the greater part of the steel these countries
make is a pressing necessity and no effort is spared to secure foreign outlets
for their product, to cultivate a world-wide good will.
The steel maker of the United States, on the other hand, has always
had, except in times of severe depression, an excellent market at home, one
ready to hand and able to absorb all the steel he turned out. The country had
been building up and expanding. Steel has been and is still needed for
railroads, skyscrapers, bridges, factory buildings, agricultural machinery,
automobiles, and a thousand and one other purposes. The result of this has
been that our manufacturers have had no particular desire in normal times
to seek foreign business with its attendant risks and expenses and the long-
term credit it demands. They were, until recent years, content to leave the
foreign markets to European exploitation and only to enter these markets
when dull business at home forced them to seek new outlets for their
product. In the earlier days of the industry American steel, at such periods,
was thrown on foreign markets at prices often below cost of production, the
loss being considered preferable to unemployment at home or the disruption
of company organizations which a continuous decline in sales would have
brought about. This process was commonly known as “dumping,” and it
was calculated to earn the bitter hostility of foreign competitors who saw
their carefully cultivated markets taken away from them by cut-throat
competition. A wave of returning prosperity at home would cause
indifference to, and independence of, foreign trade on the part of our steel
producers, an attitude that naturally did not create good will among foreign
consumers. One of the results of this state of affairs was uneven and
sporadic exports; another was that American steel had no friends abroad.
It has often been charged against our manufacturers that, although
professing to be anxious to sell their goods in all markets, they were
unwilling to meet the requirements of the foreign buyer, taking the “if they
don’t like our goods, let them go elsewhere” attitude. Fortunately, this is not
nearly so much the case to-day as it was a few brief years ago, but this

disposition is still visible in many quarters. And it gives the European
competitor, who goes on the principle that the buyer is always in the right,
an incalculable advantage. The basis for this attitude on the part of our
manufacturers lies in his assurance of vast home markets. His competitor
abroad, having perforce to sell half or more of his output in other than home
markets, naturally works to find out the needs of possible buyers
everywhere, and sets out to meet these needs. And he gets the business.
But the Steel Corporation, once having determined to build up a
permanent export business, accepted and adopted the attitude of its
European competitors that the consumer, no matter where he is, must get
his goods as he wants them, and not as the manufacturer sees fit to make
them. To do this, it became necessary to begin to manufacture a number of
new lines of steel for which there was no call in the domestic markets, to
adopt the weights and measures of each country in dealings with buyers
there, and in every way to make it convenient for the purchaser abroad to
order from the Corporation with the certainty that his business would get
the same welcome as it would if placed with a British, German, or Belgian
mill, and the same care and attention. To suit the needs of the various
foreign buyers catered to it was found necessary, in some instances, to
devote entire mills to making nothing but export products.
Wire goods constitute an important item of export and of the eleven
thousand and more varieties of wire products made by the American Steel
& Wire Co., some 1,800 are manufactured principally for foreign trade,
many of these lines not being sold in the United States at all.
For instance, the countries in South America lying below the equator
demand what is known as “varnished” wire; certain of the tropical
countries, because of climatic conditions, require a wire heavily coated with
spelter to withstand rust; and so on. The Australian carpenter is accustomed
to fasten his woodwork with a nail of oval section. No argument can
convince him that the round nail, favored in America, is just as good. He
knows what he wants and knows also that if the United States won’t supply
it, Europe will. In other parts of the world a square nail is popular. So the
Corporation makes oval nails, square nails, nails, in fact, to suit every clime
and country. It does not attempt to argue about tastes, it merely accepts
them as they are and endeavors to satisfy them—and this is the royal road
to sales and profits.

Even in the question of packing, local usage must be considered. In the
United States, the standard package for nails is the 100 lb. keg. For the
Japanese trade, picul kegs, holding approximately 133 lbs., are demanded,
while the Hindu trader, sitting bare legged and beturbaned before his booth
in the bazaars of Bombay or Calcutta, offers the passer-by small packages
of nails weighing seven pounds—put up by the American Steel & Wire Co.
It was a big job that Farrell had handed to him when he was put in
charge of the exploitation of foreign markets for the Steel Corporation. For
not only did the varying conditions affecting sales in the different parts of
the world have to be studied and plans laid to adopt manufacturing methods
to meet these conditions, but there were other obstacles to contend with,
handicaps, by the way, which it would hardly have been possible to
overcome without the backing of the power and prestige of the greatest of
corporations.
One was the question of prices. The high wages paid to American labor
as compared with labor compensation in Great Britain, Germany, or
Belgium, combined with the fact that these countries lent every assistance
to their manufacturers in increasing their world business—particularly
Germany, which encouraged the artificial keeping up of home prices and
the reduction of export prices, with the object of extending the nation’s
foreign commerce—rendered it impossible for American manufacturers to
obtain as profitable a price in competition with Europe as they did in the
domestic field. Further, as the Corporation entered many markets to find
foreign competitors already firmly established therein, it was necessary to
offer buyers material price concessions to get business at all in the first
place.
Such price cuts were nearly always essential to give the Steel Products
Company its first foothold in the desired markets, to force the entering
wedge. The fact that the Corporation has at times sold abroad cheaper than
at home has been used as a weapon against it by its critics. Apart from the
fact that its doing so afforded labor to many American workers and thus
reduced unemployment, it seems plain that a seller must make his price to
suit the market in which he is operating, that had such price concessions not
been made the Steel Corporation’s export business would never have shown
the remarkable growth it has. Europe would have undersold it in all
markets. However, the Corporation refused to follow anything like the old

dumping policy, often refusing otherwise very desirable business on the
single issue of price.

James A. Farrell

Besides the preference, natural on the part of the buyers, for well-
known and long-established goods and the close connection of foreign
manufacturers antagonistic to a new competitor in the field, the Corporation

had other difficulties to overcome. These included banking facilities in the
various countries opposed to business with America; cheaper freights and
better steamship accommodations in foreign ports than were available from
the United States; preferential duties, and so on.

Transporting 222 Tons of Bridge Material in China

For years the Steel Products Co. consistently contended against these
obstacles, gradually introducing its products into one market after the other,
until it eventually attained the point where the quality of the goods it sold
was recognized and business could be secured without concessions in price
from the levels charged by European competitors.
Although in its effort to gain a foothold in foreign markets the
Corporation was compelled to offer steel, at first, below domestic prices,
this condition did not continue as long as is generally believed. For many
years prior to the outbreak of the war prices secured on foreign business
were practically the same as those obtained on domestic, more in the case
of some products, less in others. In 1911, for instance, the average mill

price received by the Corporation on rails exported was $27.32 compared
with $28.00 in the home trade. Rail exports for the year were valued at
$11,377,000. A concession of 68 cents a ton does not seem extravagant in
view of the large volume of business obtained. In 1918 average price
realized for nails for export were $17.49 a ton, and in 1919 $10.02 a ton,
higher than the average received on domestic shipments.
The European war, of course, changed the export situation for the time
being completely. The British navy stood between Germany, the largest
exporter, and her foreign markets. Belgium’s mills were seized and in some
cases destroyed by the invading Hun. England, of necessity, had to turn the
mass of her steel output into shells, guns, and other war materials. There
was but one country that could supply the hungry world with steel—the
United States. And to it every consumer turned.
From almost complete indifference the American steel trade turned to
enthusiasm regarding foreign business. Steel export companies sprung up
like mushrooms anywhere and everywhere. So great was the need of
foreign buyers of steel, that any one, with or without capital, could become
a broker in the metal, and was sure of getting all the buying business he
could handle. The trouble was to get the steel.
Most of the export firms and corporations that sprung up at this period
will eventually disappear. Many of them have already done so. But there are
a number, backed by conservative and financially strong interests, that are
in the business to stay, and practically every American steel manufacturer,
either directly or through one of these agencies, to-day exports part of his
product and expects to continue to do so. The steel trade at large now
realizes, what the Corporation did from the beginning, that a permanent
export business is of major importance in assuring stability in trade
conditions.
How much of the export trade secured during the war years can be held
permanently is entirely a question of opinion. Undoubtedly, Great Britain
and Germany will strain every effort, when they get over their present
difficulties, to regain the business they lost to us between 1914 and 1918.
They are already starting to compete. And France, having recovered the vast
ore deposits of Lorraine, may become a steel exporter, too. On the other
hand, some authorities are of the opinion that manufacturing costs of steel

in England and Germany at the time this is written are higher than in the
United States, and that the European producer will never regain the
advantage of low labor costs he once enjoyed. Time alone will settle these
questions. But with the steel trade of the United States as a whole devoting
its energies to cultivating and holding foreign markets the probabilities are
that at least a substantial portion of the gain in exports shown in the war
period will be maintained indefinitely.
The Steel Products Company has not sought merely to increase the
gross tonnage of its business. In the years preceding the organization of the
Steel Corporation the steel exports of this country consisted very largely of
the cruder and less profitable materials, particularly iron ore, pig iron,
billets, and steel bars. It will readily be seen that the most important
business is that which shows the greatest profit, that in finished rather than
in raw or semi-finished material, the finished product meaning not alone
larger profits to the shipper, but more employment and a higher rate of
remuneration to labor. The higher degree of finish to the products
manufactured the greater the wages paid to the worker. In exporting iron
ore, pig iron, scrap and cast iron, only the cheapest materials are involved,
the lowest paid labor engaged. It is a question whether such exports,
particularly those of iron ore and pig iron, are of any real benefit to the
country as they involve the sacrifice of natural resources usually at such
unremunerative prices that from the standpoint of conservation it might
appear wiser, to economists, to withhold these reserves for domestic rather
than foreign consumption. And the policy of the Corporation in developing
its world trade has been in harmony with this thought; its efforts have been
consistently to decrease the volume of its foreign sales of the less-worked-
up materials and to increase sales of the more highly finished products.
As may be supposed, conditions brought about by the war changed the
situation materially, hence, figures illustrating the policy of the Corporation
to develop exports more along the line of finished materials must be sought
in the pre-war period. In 1912, the record pre-war export year, the
Corporation shipped abroad 2,223,536 tons of finished steel products and
only 42,031 tons of pig iron, ingots, and scrap. In the year 1904,
immediately following the organization of the export company, foreign
shipments were 1,002,967 tons of a gross value of $31,388,139, an average
of $31.30 a ton. These figures are f. o. b. on the seaboard. In 1912 the

tonnage exported was 2,265,567 of an average value of $40.60 a ton or a
total value of $91,984,239. In the period indicated there had been an
increase of 125.9 per cent. in tonnage, of 193.1 per cent. in total value, and
of 29.7 per cent. in the average price, more than $9.00 a ton. Incidentally,
the average price received on domestic business by the Corporation
declined from $41.34 a ton in 1904 to $36.53 a ton in 1912, or nearly $5.00
a ton.
Part of the gain in export prices during the period in question was due
to the increasing percentage of more highly finished goods in total export
shipments and part to the fact that the Corporation’s products were
becoming more established in world markets and were getting the
confidence of buyers therein.
How important has been the part played by the U. S. Steel Corporation,
through the Steel Products Co., in developing the iron and steel exports of
this country, is shown in the table below. Tonnages given for the United
States include only iron and steel exports proper, and not machinery and
other articles not manufactured by the Corporation, or scrap sheet and iron:

U. S. STEEL
UNITED STATES
YEAR CORPORATION
GROSS TONS
GROSS TONS
1904 1,139,519 1,002,967
1905 1,002,289 939,517
1906 1,314,444 1,123,545
1907 1,276,292 982,084
1908 942,409 765,947
1909 1,218,225 1,000,395
1910 1,509,864 1,270,599
1911 2,102,014 1,712,877
1912 2,826,576 2,265,567
1913 2,640,142 1,797,948
1914 1,512,848 1,108,483
1915 3,450,783 2,355,858
1916 5,885,948 2,463,922
1917 6,268,514 2,229,747

1918 5,341,360 1,648,160
1919 4,354,086 2,004,190
1920 4,925,000 (est.) 1,645,192

Between 1904 and 1912 the Corporation’s exports increased 1,262,600
tons, and the exports of the country 1,687,057 tons, the Corporation’s
increase in shipments accounting for approximately 75 per cent. of the total
gain shown by the United States.
During the years of the World War the country’s annual exportations of
iron and steel products were greatly increased as compared with the largest
pre-war year. During the same period the Corporation’s exports were only
slightly increased. The reason for this was that the Corporation’s operations
were largely confined to commercial products and not to war munitions.
Large quantities of steel were, however, produced and delivered to the
government and to government agencies for use in the manufacture of
munitions and for other purposes in carrying on the war.
Government records show that the exports of the United States in 1900,
the year before the Corporation was organized, were 1,154,284 tons, and in
1901, 942,689 tons, these figures falling to 372,399 tons in 1902, and
326,590 tons in 1903. Hence, it has been urged that the immediate effect of
the Corporation’s organization was adverse to exports. But the government
figures include a large number of items such as subsidiaries of the
Corporation do not manufacture, or such as they do not now export—for
instance, many articles manufactured of steel, and steel scrap. As a matter
of fact, the companies merged into the Corporation exported 291,000 tons
of steel products in 1901. In the following year, the big company shipped
more than 300,000 net tons.
To-day the Corporation’s products and agents penetrate into almost
every part of the known globe. Its ships plow nearly every sea. The goods it
sells to the world range all the way from wire nails and watch springs to the
steel frames for great buildings. In Buenos Aires, for instance, the
Corporation maintains its own force of erectors, and nearly all the big
modern buildings of the Argentine capital have had their skeletons put
together by the “Steel Trust” riggers, the men whom Farrell once described
as working with one hand for their job and holding their lives in the other.

The bulk of the steel used in the construction of the Panama Canal, about
175,000 tons, was supplied by subsidiaries of the great company.
Some of the principal markets for United States Steel’s surplus output,
with the products they take are: Iceland, wire products and structural steel;
Java, Sumatra, and Borneo, oil piping and galvanized sheets; India, sheets
and wire products; Argentina, structural and merchant products; South
Africa, pipe and light rails for use in diamond mines; Pacific coast countries
of South America, roofing material, wire, rails, etc.; Patagonia, railway
material; Canada and Mexico, practically every product made; Northern
Africa, wire and sheets; Egypt, wire and cotton ties; Australia, a general
line; the countries formerly comprising the Austrian empire, wire goods and
pipe; Syria and the Holy Land, wire fence, pipe, and small nails used in
putting together date boxes; Rangoon, pipe, nails, fence, and sheets; West
Indies, a general line; Rumania, oil pipe; Central America, a general line;
Greece, pipe, wire, sheets, etc.
China has for years been an important consumer of American steel. Her
takings cover many lines and include bridge material, pipe, sheets for
roofing as well as for making stove-pipes; tin plate used in making
containers of egg yolk, which she ships principally to the United States,
wire goods of various kinds, nails, including an extremely small type used
in making bamboo furniture. In addition, owing to her low labor costs,
China is a great market for scrap steel, such as defective wire rods, wire
shorts and seconds, bar ends and plate cuttings, which are worked by hand
into all sorts of implements. The patient and industrious Celestial even finds
use for old horseshoes, which he makes into razors.
The Corporation has thirty-six foreign offices, located in Argentina,
Australia, Belgium, Brazil, British India, Canada, Chile, China, Cuba,
France, Holland, Italy, Japan, Java, Mexico, Norway, Peru, Russia, Spain,
South Africa, and the United Kingdom. In addition to these, it has one
hundred and thirty-six distributors located in forty-four foreign countries.
Although the Steel Products Co. avails itself of the facilities for
shipping offered by the many steamship lines plying between America and
foreign ports, the enormous expansion of its export trade has forced it to
establish and maintain a large ocean-going fleet of its own. Formerly, the
greater part of this fleet was chartered, but now the Corporation owns

twenty vessels, and has only a few others chartered. These vessels carry its
products all over the world, touching at many little-known ports and
harbors, the waters of which are never disturbed by the prows of regular
liners. At these places they put off loads of rails, tools, and diversified
products, instruments with which pioneers, like railway builders, are
extending the marts of civilization into untrodden lands.
All of the owned vessels fly the Stars and Stripes, those built in foreign
countries having been transferred to American registry immediately upon
the passage of the Ship Registry Bill, in 1914.
Most of the ships owned by the Corporation were built at its own plants
in New Jersey and Alabama. The Federal Shipbuilding Co., the
Corporation’s shipbuilding subsidiary near New York, has supplied it, so
far, with nine vessels, each ranging from 3,450 to 3,821 tons net register.
The Chickasaw Shipbuilding & Car Co. is responsible for the construction
of four others, the largest of which, and the largest boat owned by the
Corporation, is 4,045 tons net register on about 10,000 dead weight. The
other seven vessels were purchased. At the time of writing the Corporation
has under construction fourteen other vessels, all of which will be added to
its fleet when finished.
Two of the Corporation’s boats were lost during the war, one a victim
to a German submarine and the other running aground off the Chilean coast
early in 1918.
No less than fourteen different steamship lines are operated by the Steel
Products Co., which through them handles its fleet. These lines are:
Isthmian Steamship Line; New York and South America Line (to Chile and
Peru); Pacific Coast Service (to Pacific coast, United States, and Canada);
New York-Far East; New York-Rotterdam Service; New York-
Mediterranean Service; Gulf-Rotterdam Service; Gulf-River Plate Service;
Gulf-India Service; Gulf-Scandinavia Service; Pacific Coast, United
Kingdom & Continent Service; Norton Line (New York to River Plate);
United States and Brazil Steamship Line; Panama-Far East Line.
The shipping of steel to certain points lacking a regular service often
makes necessary the employment of expedients to reduce the attendant
costs. For instance, prior to the opening of the Panama Canal, a fleet of six
vessels was engaged in the trade with the east and west coasts of South

America. These vessels sailing from the Atlantic seaboard made calls at
various points in Argentina, Chile, Peru, and thence to British Columbia,
where they found themselves empty and without opportunity for picking up
a cargo for the return trip. The expense of the long journey in ballast round
the Strait of Magellan home was prohibitive, so these vessels usually made
trips to French or English ports, carrying general merchandise, making the
shorter trip across the Atlantic to their home port under ballast, or with a
cargo if it was possible to get one. Such a voyage would cover 35,000 to
40,000 miles and take about nine months. The opening of the Panama
Canal, however, has changed the conditions that made this necessary.
The shipping of steel to the less-known parts of the world involves
difficulties never encountered in the home market. The men in charge of
exports must be men of initiative, accustomed to overcoming handicaps as
they arise and to deliver the goods without the aid of the efficient methods
of civilization.
On one occasion a special order for a number of boilers took one of the
Corporation’s vessels to a harbor on the west coast of South America where
the arrival of a steamer was a rarity, and facilities for landing cargo were
conspicuous by their absence. The lack of hoists or any other method for
lifting the boilers ashore was easily overcome, however. The crew of the
ship was ordered to plug up the boilers at both ends and hoist them
overboard, floating them on the waves to the sandy beach.
But this novel method of delivery created a dearth of labor in the
vicinity. The natives, at the sight of the huge steel cylinders leaping from
the waves and rushing ashore on the tide, decided that they were strange
and fearsome monsters of the deep and they fled in panic to the woods
where they remained for several days before they could be induced to return
and carry the boilers to their destination.
On another occasion similar difficulties were encountered, but the
cargo in this case was one of steel rails for the first line ever built to
Buenaventura, Colombia. The rails had to be unloaded separately and sent
ashore one by one on the little native dugout canoes. It was only the skill of
the natives in handling their frail barks with such unwieldy cargoes that
prevented a large part of the shipment finding a resting place at the bottom
of the harbor.

The American Bridge Co. has erected a number of bridges in the Far
East. Some of these have been in the interior of China, where the rivers,
subject to seasonal floods and periods of absolute dryness, provide the main
highways for freight traffic. In such instances the steel for the bridges was
hauled up the river beds during the dry seasons, and if the rains arrived
before the destination was reached, the steel was simply left on the river
bed until the subsidence of the flood permitted the resumption of the
journey up-stream.
In developing its export trade the Steel Corporation has performed a
real and important service to American commerce generally. To a great
extent, shipping depends on the trend of “weight cargo,” and exports of
other goods classed as “measured cargo” depend similarly on shipping
facilities. By supplying the heavy cargo for numerous markets where
American goods had never sold before the Corporation made it possible for
manufacturers of many lighter products to develop business for themselves
in these new markets. In other words, it blazed the way for American
commerce as a whole. How great is the debt that American business
generally owes to the Corporation, and to a less extent to the Standard Oil
and International Harvester companies, is plain when it is realized that these
three companies shipped for many years more than half the “weight cargo”
leaving the shores of the United States.
One of the principal benefits of large exports is its effect on labor in the
producing country. The Corporation’s effort has been to find a regular
market in foreign countries for 20 per cent. of its total output. This level
was never actually reached under normal conditions, although during the
war exports did, at one period, run about 33 per cent. of total production for
a time. Taking the year 1912, the record pre-war year for exports, as a
representative period, we find that shipments to customers abroad
represented nearly 18 per cent. of total finished steel delivered by the
Corporation’s mills. As the “Steel Trust” in that year employed an average
of 221,000 men, this meant that about 39,000 workers were busy on
material destined for export and that $34,000,000, of the Corporation’s
payroll of $190,000,000 was being paid to American labor by foreign
consumers. In 1919, 16.5 per cent. of the total business was export and by
the same analysis, foreign buyers paid American workmen in the
Corporation’s plants more than $79,000,000 in wages.

In the final analysis, this figure will be increased, as the Corporation
under normal conditions encourages and assists companies manufacturing
its products into machinery, cars, locomotives, etc., to expand their exports,
by giving price concessions on steel purchased for that purpose. This re-
export business gives work to a substantial number of the Corporation’s
employees.
The building up of the vast export sales organization maintained by the
Corporation has been a Herculean task, but it has been well worth the effort.
By establishing its name and its product all over the world the Corporation
has not only added to its profits and to its markets but it has helped to
relieve the pressure of over-production which the industry feels from time
to time, and thus it has conferred a substantial benefit on the steel trade as a
whole.

CHAPTER VII

THE SPIRIT OF THE CORPORATION

T
o one interested in social and industrial questions a tour over the
vast properties and plants of the United States Steel Corporation
can hardly fail to be of great educational value. It has been the
writer’s good fortune to be able to make such a tour on more than one
occasion. He had expected to be, and was, impressed by the various
processes whereby iron ore is converted into steel ingots and then into rails,
tubes, structural shapes, plates, bars, wire, nails, tin plate, and other
products; by the monster machines used for loading and unloading ore; the
blowing furnaces, pools of molten metal; the great rolls through which the
red-hot steel is passed on its way to becoming a finished article of
commerce; the mining of coal from the bowels of the earth, and the
thousand and one other sights of what is probably the most spectacular of
all industries.

But the more lasting impression was made not by the mechanical
apparatus but by the human factor, the manner in which the vast human
machinery that makes the Corporation was handled; the organization that
made it possible for an army of more than a quarter of a million men to
work in complete harmony and to a single end. In a word, the spirit of the
Corporation.
As one becomes more and more familiar with the great company’s
activities at first hand, more and more does it become plain that the entire
organization is permeated with this spirit. From Judge Gary, its chairman
and chief executive, and James A. Farrell, its president, who directs the
manufacturing and commercial operations, down through the heads of the
various constituent companies, and so through the subordinate officials,

through those whom we may call the non-commissioned officers of the
steel army, the foremen and mine captains, and finally among the men, both
skilled workers and common laborers, there is evidence nearly everywhere
of a universal sentiment of loyalty, of personal interest in the fortunes of the
big company and of the will, on the part of each man, to give the best in
him for the general result.
The above statement was originally penned six or seven years ago, after
the writer’s first tour of the Corporation’s plants. Since that time the world
has seen a general upheaval of labor. The Corporation itself has had to fight
a great strike, and it would therefore be natural to suppose that the spirit of
the Corporation had been adversely influenced during these trying years,
but a recent visit to the Corporation’s plants did not bear out such a
presumption. Rather, it left the impression that in spite of general labor
unrest and notwithstanding the efforts of labor leaders to destroy it, the
spirit of loyalty and coöperation is still strong in the great mass of the
workers.
What is the reason for this spirit? How had it been possible to leaven
with it so great a mass of men of different nationalities and varying degrees
of intelligence? An excellent answer to these questions was furnished by
one of the men, not one of the executives or operating heads, but one of the
rank and file. He said:
“In the Steel Corporation the man who gives gets. Question those who
are in the higher positions, who are drawing big salaries, and you will find
that they all worked their own way from the bottom. Several of the men
holding important jobs, now my bosses, I knew when they held little ones,
and in every case I was satisfied that the advancement they got they fully
deserved. I don’t believe that there is a single official of the Corporation, or
of any of its subsidiary companies, who got his job through pull. Hard work
is the only key to success with us, and it is a sure one. In brief, I feel bound
to give this Corporation a square deal because I know that it will give me a
square deal.”
A square deal—that is the secret of the Corporation’s spirit. The desire
for justice, for fair and full recognition of fair and full service, is deep
grounded in every man, and the management of United States Steel, by
giving each worker the assurance that he will get just what is his due, has

secured for itself the entire coöperation of most of its employees and has, as
a result, an organization that probably could not be equalled elsewhere in
the industrial world.
The Steel Corporation is a true democracy. No position in it, however
high or responsible, is beyond the reach of any employee who proves his
ability to handle the job. Farrell, now president, started as a laborer in a
wire mill. The late Thomas Lynch, for many years head of the Frick Coke
Co., handled a pick in the coal mines of that concern. Charles M. Schwab
and William Ellis Corey, two former presidents of the Corporation, both
started from the very bottom, as did Alvah C. Dinkey, one-time head of the
Carnegie company, and a number of others. Even Gary, although he did not
become connected with the steel industry until in middle life and after he
had made a marked success in the legal field, was not the son of a wealthy
man, and won his way to fortune by hard work combined with unusual
business ability. There is no open sesame to honor and advancement in the
big company, nor for that matter in the steel trade as a whole; the keys to
success are ability plus energy.
“Nor could it be otherwise,” said one of the men who had himself
climbed the ladder; “in steel making harmonious team work is essential to
good results, and the natural leader rises to the top by the general
recognition of his fellows.”
Efficiency, that supreme factor in large output and big profits, has
become a fetish in industry in recent years. In its final analysis, “The Spirit
of the United States Steel Corporation” is efficiency, not applied merely to
the mechanical processes of manufacturing, but to the human element
behind these processes; the efficiency that abides in a healthy, well-housed,
and contented workman.
The Corporation has always taken a keen interest in matters affecting
conditions of labor. It has lent its influence, its money, and the time of its
officials to better these conditions, to provide more attractive homes and
more sanitary and healthful conditions for its men, better educational
facilities for their children, and wholesome amusement for all. For itself,
the big company expects the benefit from the resultant increased efficiency
and loyalty. For the worker, the most important gain is added self-respect.

George G. Crawford, president of the Tennessee Coal, Iron & Railroad
Co., says on this point: “Summed up, the end of all social betterment work
is the inculcation of self-respect. The worker possessing this attribute is
worth more to himself, to his employer, and to society generally, than the
man lacking it. Without self-respect, he remains a common drudge, his
value at best stationary, but more likely receding. With it comes ambition
and energy, and it is only the short-sighted employer who does not set high
store on these qualities and encourage their growth. The lowest kind of
labor is always to be had, but the men with ambition and the will to make
good that ambition, the men of real value to themselves, are not so easy to
find—and they are many times more necessary!”
Mr. Crawford pointed out that many young men who might be marked
out for advancement in the steel industry, where their energy and ability
would be quickly recognized and rewarded, prefer to go into offices or
stores as clerks, although the field of advancement there is much smaller
because natural conditions in a steel mill or coal mine, unless mitigated by
the efforts of the employer, were such as to injure their self-respect. By
surrounding living conditions in the industry with those things that make for
clean, decent manhood such men would be attracted and the employing
corporation would thereby open to itself new fields for recruiting to its
organization the highest type of men.
The work done by the Corporation in making conditions at its plants
more safe and sanitary, in endeavoring to improve home conditions among
its workers, in providing better educational facilities for their children, and
so on, will be detailed in another chapter. Any official of the Corporation or
of such concerns as have worked along similar lines will tell you that the
installation of these helps to better living is plain, practical business. That
the gain in efficiency pays many times over the outlay involved. They
studiously deny altruistic motives. But the observer who has an opportunity
to become familiar with their activities can hardly help arriving at the
conclusion that the men who engage in this work for the improvement of
working conditions usually become engrossed in it for its own sake. That
the human side of the work, deny it as they will, eventually and inevitably
comes to occupy the chief place in their minds.

“Drawing” Bee-hive Coke Ovens

Under the Corporation’s stock subscription plan many thousands of
employees have become stockholders of the great company. It has been
suggested by those who see nothing but menace to the workers in every
action of a big corporate enterprise, by those to whom the very word
“corporation” is anathema, that this plan had for its real object the
subjugation of the worker by inducing him to invest part of his wages in the
securities of the employing company and then demanding from him
unswerving obedience; enslaving him by holding over his head the fear of
the loss of his investment. It has been claimed that the plan was a master
stroke to give the Corporation the whip hand in the event of a strike. It is, of
course, impossible to argue motives, but the plain facts are that the plan has
not worked out this way.

“Pushing” Coke in By-Product Oven

The Other Side—Coke Falling into Car
Two Views of Modern By-Product Oven

Far from instilling the spirit of fear into the men, it is noticeable that
stockholding employees regard themselves, and rightly, as owners in the
vast enterprise of which they are a part, that they feel a genuine interest in
its welfare and work wholeheartedly to further its interests. They take a
pride in the Corporation that is very real and apparent and it is not strange
that this should be so. If the Corporation designs to make its workers
subservient it is ipso facto defeating another great end it is unquestionably
striving for—efficiency. Because self-respect and servility are implacable
enemies and cannot exist together.

The offering of stock to employees on attractive terms is merely
another efficiency measure. Each employee who is a part owner in the
business works for more than his wage. “His heart is in his work and the
heart giveth grace to every task.” Moreover, the plan encourages thrift, and
every employer knows that a thrifty worker is more reliable than his
spendthrift brother, less prone to the inefficiency induced by financial
worries. Finally, the having of a stake in industry and through it, in the
country’s prosperity, makes a man a better citizen and increases his
independence and self-respect.
If the subject of self-respect appears to be harped on to some extent, it
is because it is of paramount importance, its influence affecting not only the
worker and his employer, but the whole community. If the writer were
asked to sum up in a few words what the Steel Corporation has done for
industry, these words would be: It has exerted an enormous influence in
helping the worker, the common laborer, to become a self-respecting
citizen.
The tangible gain to the Corporation has been enormous. The intangible
gain, although it cannot be measured, has almost certainly been many times
as great. The management of the big company realized that the workers’
rights to a decent life were fully as important as the rights of capital, and
that more, both in mental satisfaction and in profit, was to be gained from a
recognition of these rights than from their denial. Perhaps, too, it saw that
sooner or later the day would dawn when the worker with his hands would
demand fair treatment, and it had the foresight and the courage to hasten the
dawn of that day.
In the matter of wages the Corporation’s course has been in entire
harmony with its general policy toward the worker. Since its organization in
1901 it has many times, and always voluntarily, increased wage rates, and
in doing so it has set a lead which other steel companies have found
themselves forced to follow. Only once has it ever reduced wages and then
but a small amount and only after the dividend on the common stock had
been eliminated. The wages were soon restored and frequently thereafter
advanced. Its principle has been that capital and labor both have important
rights in the financial results of industry, but that labor is perhaps more
directly concerned and should therefore be the last to suffer in times of
stress.

Since 1901 the average wage rate of the steel worker has been
increased approximately 237 per cent. and this increase has been due almost
entirely to the Corporation’s stand on this question. Any one who doubts
this has but to ask the competitors of the big company to be convinced. In
1911, when steel prices were at an unprofitable level and business was
slack, the heads of more than one independent company expressed the
opinion that a reduction in wages, what they called the liquidation of labor,
was necessary, even imperative, but that they were restrained from
attempting this liquidation while the Steel Corporation continued to pay its
men the old rate. They said in effect: “The United States Steel Corporation
boosted wages to the present high level. Let it take the lead in lowering
them.” But the Corporation refused. Instead, with the first signs of an
improvement in business, it gave wages another boost. Again in 1914, in the
face of the worst period of depression in years, and with world industry
demoralized as a result of the outbreak of the European war, and in spite of
the fact that the Corporation had been compelled to forego the payment of
the dividend on its junior stock and was not fully earning its preferred
dividend, its management refused to let the worker suffer. So strong was the
sentiment throughout the trade at this time in favor of the liquidation of
labor that a wage cut was looked on as not only justified, but inevitable, and
it is generally understood that even in the Corporation it was only the
insistence of Judge Gary that prevented its occurrence.
At the present writing, world industry is going through a process of
deflation from the high prices induced by the war. In some instances the
effect is already visible on labor. Cotton mill workers in some parts of New
England have themselves suggested a decrease in pay to keep the wheels of
industry running. In the steel trade costs are admittedly high and wages
constitute the chief factor in costs. But if one may conclude from Judge
Gary’s public utterances in recent months the thought of reducing wages at
present is far from the mind of the Corporation’s management. A liquidation
of labor may occur later, but if it does, it is a reasonable assumption that, so
far as the Steel Corporation is concerned, it will not take place until living
costs have been at least sufficiently deflated to make the new real wage of
the worker as distinct from his money wage, at least as high as it is to-day.
Average wages paid by the Steel Corporation to its employees during
the past eighteen years have been as follows:

1902 $716.88
1903 720.08
1904 677.18
1905 710.78
1906 729.86
1907 765.18
1908 729.44
1909 775.77
1910 800.95
1911 819.85
1912 856.70
1913 909.50
1914 905.36
1915 925.06
1916 1,042.41
1917 1,295.87
1918 1,684.58
1919 1,902.13
1920 (partly estimated) 2,169.00

Although the average wage in 1914 was some four dollars less than in
1913, the average day wage to the worker, exclusive of the administrative
and selling cost, was $2.88, compared with $2.85 the previous year. This is
significant as indicating the policy of the Corporation to equalize as much
as possible the amounts paid to different classes of workers. In instituting
advances, it has always been the lowest classes of labor that have benefited
most. The workers themselves have testified to satisfaction with this policy
and their recognition of its essential justice.
The Steel Corporation has been subjected to occasional attacks because
of its attitude toward labor unions. It neither encourages nor approves
unionism. It does not contract with unions as such. It stands for the open
shop. As it is plain that this biggest of all employers has not sought to crush
the worker, that it has, in fact, done much to make his lot better and
brighter, the question may fairly be asked why it is opposed to dealing with
organized labor.

The reason is not far to seek. Unionism is opposed to efficiency, it
destroys the esprit de corps that is so important in getting the best results
from a large body of men. It prevents promotion according to merit. In its
very essence it is antagonistic to the employer; it sets labor and capital into
two distinct and constantly armed camps; it would make war between
capital and labor. And the management of the Corporation believes that the
only workable solution of the whole industrial problem is to bring labor and
capital into friendly coöperation, to give labor a part in the earnings of
industry, making the interests common.
This cannot be accomplished in a hurry. A movement of so vast a
magnitude must necessarily take time. But had the Corporation’s employees
been organized it is doubtful if the betterment of conditions of its workers,
and consequently of the steel workers of the country, would have
progressed as rapidly as it has.
The labor union, if used to help the oppressed worker, is
unquestionably a beneficial factor in industry. Used as it too often is, to
promote the selfish interests of its leaders, and to impinge upon the rights of
the public at large, it is just as surely a great evil. The logical result of union
labor as preached by its principal exponents is to cripple initiative, and to
oppress the worker who prefers to stand on his own feet. And, in America at
least, the majority of the workers are of this independent type. And in
maintaining its policy of the open shop the Corporation has been fighting
the battles of this class of workers.
The writer has tried to show that loyalty and coöperation permeate the
United States Steel Corporation. That it is the result of the endeavor on the
part of the big company to give to the men who make up its organization
absolute justice, the square deal; its effort to make the worker, even the
poorest, an independent, self-respecting citizen, and to give to every man in
its mines, mills, offices, etc., an opportunity to share in the profit derived
partly from his efforts. All this to promote efficiency, the “spirit of the
Corporation,” to increase the value of the worker to himself, to his
employer, and to the community. He believes that the facts justify the
statement made in an earlier chapter that the organization of the United
States Steel Corporation was the greatest step that has ever been made
toward the highest form of socialism.

CHAPTER VIII

THE CORPORATION’S IMPLEMENTS

W
e live to-day in the “Age of Steel.” The metal probably plays a
more important part in our civilization than any other product
made by the hands of man. Our big buildings, our navies (both
war and merchant), our trains and the rails they run on, machinery of all
kinds, tools for every trade—all steel. Furniture, watch springs, even wire
hair for stuffing mattresses and other uses—steel again. And new uses for
the metal are being discovered almost every day.

It is difficult to realize that the age of steel is hardly more than half a
century old. But fifty years ago steel, commercially, was still something of
an experiment, struggling against iron for its place in the sun. At that time
the head of one of the greatest railroad systems of America dismissed a
persistent salesman who had been trying to secure his order for steel rails,
with the exclamation: “Steel rails? Bosh! Stuff! Nonsense!” To-day that line
has many thousand miles of track and every rail in it is steel. Not two
generations ago engineers viewed askance the plans of the designer of the
first skyscraper. They regarded as absurd the proposal to build “a steel
bridge up into the air.” To-day the Woolworth Building towers nearly eight
hundred feet above the pavement of Broadway.
From the day when steel was made “by the spoonful” to the present,
when the great “Steel Trust,” with its thirty-eight Bessemer converters and
334 open-hearth furnaces, is capable of producing some 65,000 tons every
twenty-four hours, is a far cry reckoned in terms of industrial development
short as the reckoning may be in years. The pioneers of steel never dreamed
of the enormous proportions to which the industry would grow, the
innumerable uses to which the metal would be put.

What is steel? Iron that has been refined and hardened by processes in
which heat plays the most important part.
Iron ore is found in large quantities in many parts of the world.
Sometimes it is loose, like earth, and again it is a rocky formation. Its color
also varies, some ores being red, others yellow, and so on through various
shades and tints. But the pure metal is white and, strange as it may seem,
quite soft. Cleansed of its impurities, and hardened by a mixture of carbon
and other ingredients, it becomes one of the hardest of metals.
Iron, apparently, is common to all the planets. Meteorites usually
contain a large percentage of it. So general is its distribution on this planet
that a theory has been advanced that the globe on which we live is nothing
but a vast mass of iron thinly incrusted with rock and earth, and that the
deposits found near the surface are merely the outcropping of this
inexhaustible mine.
The Western Hemisphere is particularly favored in regard to deposits of
iron. Immense ore bodies exist in the United States and Canada, Chile,
Brazil, Cuba, and other parts. Of the known ore beds in this country, the
most important lie around Lake Superior. Near this great inland sea there
are no less than six different ore ranges, the Mesaba, Vermilion, Marquette,
Gogebic, Menominee, and Cuyuna. Of these the Mesaba is the largest,
richest, and most easily worked and from it is taken a material portion of all
the ore mined in the United States. There are ore bodies of considerable size
in Alabama, New York, New Jersey, Pennsylvania, Colorado, Wyoming,
New Mexico, and Utah, and another large deposit is now reported to have
been discovered in Oregon.
Some American steel makers import part of the ore they use from
Sweden, Cuba, Spain, and Chile. But the Steel Corporation’s subsidiaries
have depended so far upon the Lake regions for their ore supplies, except
the Tennessee Coal, Iron & Railroad Co., which uses Alabama ores.
Although iron had been made in America long before the War of
Independence nothing was known of the immense deposits in the region of
the Great Lakes until 1845, in which year Philo M. Everett was guided by
Indians to “a mountain of solid iron,” to which he gave the name of the
great missionary explorer, Marquette. Shortly afterward a surveyor named
Stunz set out to seek gold in the wild region north of Superior, and came

back to civilization with a tale of vast iron deposits in what is now known
as the Vermilion range. But so far and hard to reach were these deposits that
it was not until the early seventies that capital, as represented by the late
Charlemagne Tower, could be interested in the exploitation of these
deposits.
Still another gold seeker was responsible for the discovery of the
greatest of all the ranges, the Mesaba. Some years before the Civil War
Louis H. Merritt, a prospector, struck out into the woods in quest of the
yellow metal, but brought back with him nothing but a few samples of iron
ore. Little did he dream that he had found what would one day prove more
precious than gold.
Merritt told of his discovery only to his four sons, and it was not until
1885 that these young men staked out their first mine in the desolate region.
The Merritts were lumbermen, and the mining fraternity, having proved to
its own complete satisfaction that iron deposits in the Mesaba section were
geologically impossible, scoffed at their enterprise, but in one single year
since the Steel Corporation alone has taken 24,928,039 tons of ore from this
range, a single mine yielding 3,500,000 tons.
There is a legend told in Minnesota, the story of a practical joke which
had a different end from that expected by its perpetrators, and the result of
which has been a great boon to the cause of education in that state. The
story had its beginnings before the Civil War. At that time, it goes, the
public school system of Minnesota, neglected in State appropriations and
impoverished, clamored long and loud at the door of the legislature for a
share in public lands, and eventually gathered enough popular support to
wring from the law-makers a promise of ten sections. The promise was
kept, but to the discomfiture of the educators and the amusement of
everyone else it was found that the sections lay beyond the pale of
civilization far in the northeastern corner of the state, an uninhabited,
unexplored territory.
And then Merritt discovered the Mesaba range, and the implements of
the steel companies began to shovel gold to the credit of the Minnesota
school system.
The story is of doubtful authenticity, but it is nevertheless a fact that the
Minnesota schools own large acreages of ore land, and their enormous

receipts of royalties on ore shipped therefrom make them probably the
richest in the world.
A mine, in the commonly accepted sense of the word, is a deep shaft in
the ground from which tunnels, or “drifts,” radiate through the ore bodies.
But nature, in the Mesaba region, has saved the steel maker the trouble of
burrowing under the earth’s surface to get at her riches. The majority of the
mines here are not mines in the accepted sense at all. They are what a
veteran of pick-and-shovel methods called them when he first saw one in
operation. “Mine?” he exclaimed. “Why, that isn’t a mine, it’s an ore farm.”
Imagine a vast amphitheatre hollowed out of the ground half a mile
wide and a mile and a half, or more, long—these are the dimensions of the
Hull-Rust mine at Hibbing—and descending in a series of deep terraces to
120 feet or more from the surface, every terrace, save the first, being dug
out of iron ore, and you will get a vague idea of what one of these Mesaba
“ore farms” is. The mines are graded toward one end to permit the entrance
of trains, and big steam shovels burrow into the soft ore, scooping up, some
of them, seventeen tons of ore at each lift, and dumping it into the waiting
cars.
Under these conditions mining becomes principally a matter of
speeding up steam shovels and of transportation. At the beginning of the
century no mine had ever shipped 500,000 tons of ore in a season. The
Hull-Rust mine has shipped more than that a month, a ton of ore every two
seconds, allowing for a ten-hour working day.
Exclusive of the mines covered by the now abandoned Hill lease the
Corporation has developed more than seventy mines in the Mesaba range.
In the Vermilion range it has three; in the Menominee, seven; in the
Marquette, twelve; in the Gogebic, thirteen, and in the Baraboo range in
southern Wisconsin, one. This does not include twenty-one mines of the
Tennessee Coal, Iron & Railroad Co. in the South. In a single year, 1916,
the Corporation mined 33,355,169 tons of ore, of which 30,255,616 came
from the northern regions. Some idea of the immensity of the Corporation’s
mining operations may be obtained from the fact that the excavations
involved in “stripping,” or removing the surface earth overburden from the
open pit mines, aggregates about a quarter of a billion cubic yards of earth,
or more than the excavation made in digging the Panama Canal, in the

Mesaba range alone. Total excavation in this range, including mining
operations, amounts to about a half a billion cubic yards.
The vast Hull-Rust mine, the greatest of the Mesaba deposits, is
perhaps the largest single body of ore in the world. Its exact extent is not
known. Only recently it was discovered that the ore body led under the
town of Hibbing, a fair-sized municipality, whereupon it was decided to
move the town to get at the ore. So in the summer of 1920 houses and other
buildings forming the town were lifted bodily from their foundations and
moved to a new location near by. This enormous undertaking seemed to be
considered quite part of the day’s work by officials of the Oliver Iron
Mining Co., which subsidiary has charge of the Corporation’s ore
operations. An official of that company, questioned about the expense of
moving the town, said: “Oh, it will cost a million or more, but there’s at
least $40,000,000 in ore under the old site.”
Ores obtained from the Mesaba and other Lake ranges usually average
slightly more than 50 per cent. in iron. There is an enormous amount of ore
in this region, however, which runs less than 40 per cent. in metallic
content, and further, is too rich in silicon, which factors make it unavailable
for steel making without previous treatment, but this ore is too valuable and
too much needed to be allowed to go to waste. The Corporation solved the
problem by erecting at Coleraine a “concentrator,” which is really nothing
but a great washing plant for ore, and by this means crude ore containing 37
per cent. or thereabout, in iron, after treatment in which water and gravity
are the principal factors, is brought up to an average of about 56 per cent.
metal. In one day this concentrator has treated 50,000 tons of crude ore,
producing 32,000 tons of concentrates.
Let us leave the mining regions and follow the ore on its journey to the
furnaces. The journey is begun in either of the two railroad systems owned
by the Corporation, and radiating over the ranges—the Duluth, Missabe &
Northern, at the head of which is William A. McGonagle, which serves the
Mesaba range principally, and the Duluth & Iron Range, of which F. E.
House is president, which serves the Vermilion section.
We shall soon arrive at Duluth, or near-by Two Harbors, where these
roads terminate. Here the ore trains run out on the huge Corporation docks,

some of which project half a mile into the lake, and dump their cargo into
enormous pockets in these docks. This ends the first stage of the journey.
But our travels have hardly begun. The next stage of the journey is
made by boat. The Corporation, through the Pittsburgh Steamship Co.,
owns no less than seventy-eight large steamers, many of them capable of
carrying 12,000 tons of cargo, and all built specially for ore transportation.
To and fro between Duluth and Two Harbors on Lake Superior, and Gary,
Chicago, Cleveland, Ashtabula, Conneaut, Fairport, and other points in the
lower Lake, this great fleet goes constantly except when winter freezes up
transportation.
Arrived at the ore docks, the boat makes fast alongside, and the work of
putting in its ore cargo begins immediately. This is a rapid-fire operation. A
touch of an electric lever and from each of the three-hundred-ton “pockets”
on the dock descends a great chute into the maw of the ship, and through
these chutes the ore, impelled by gravity, comes cascading.
In a few hours at most the work is done, and the ship is ready for her
return trip. The average time taken to load a thousand tons of ore is half an
hour, but on one occasion 12,817 tons were put into a vessel in thirty-five
minutes. In one day twenty-four boats were loaded with 211,887 tons. From
a single dock 10,921,107 tons have been put on ship-board in one season.
A sail of three or four days and we arrive at one of the lower Lake
ports. Here the boats are unloaded by methods even more impressive than
those connected with the loading operation, and so efficient that a twelve-
thousand-ton steamer has been emptied to the last spadeful in three short
hours.
Of the various unloading devices employed the Hulett machines are the
most modern and impressive. Notwithstanding their weight, which runs into
hundreds of tons, these gigantic affairs are moved up and down the dock
and perform all their operations by the touch of a light lever. Almost “a
child can handle them.” The mighty arms of these machines give them
somewhat the appearance of gargantuan grasshoppers. The operator sits in
comfort in what corresponds to the wrist of one of these great arms, and, at
his will, the clamshell bucket hand dips down into the bowels of the vessel
and, opening its metal fingers wide, to a span of 22 feet in the largest sizes,
closes with irresistible might on everything within its grasp.

The Hulett machine is the very embodiment of power, power chained
and subservient to the will of man. The incalculable force of those mighty
fingers would crush a steel railroad car as one might squeeze a sponge. A
miscalculation by the operator, and the steel ribs of the unloading steamer
would be torn away, gnarled and twisted. And each lift of that hand brings
with it a load worthy of its might, some seventeen tons of ore.
Before following the ore farther on its trip to the furnaces we can find
time to devote a minute to a related operation, the shipment of coal to the
mining regions to supply the power for the operations there. This is marked
by the same big-scale, time-saving methods. Arriving at the docks at the
lower Lakes, the coal train is run out beside the now empty vessel, and
another great machine picks up car after car, and swinging it out over the
hold of the ship, overturns it and empties it in a few seconds.
To Pittsburgh, centre of the steel industry, comes a large portion of the
ore shipped from the Great Lakes. Ore destined for the Pittsburgh furnaces
is brought from the Lake ports by the Bessemer Lake Erie, another
Corporation subsidiary, with its two hundred and five miles of main line,
the third longest and perhaps the best known of the Steel Corporation roads.
The Duluth, Missabe & Northern holds first place among these roads in
respect to mileage, two hundred and forty-seven miles, with the Elgin,
Joliet & Eastern second, two hundred and eleven miles, and the Duluth &
Iron Range fourth, one hundred and ninety-seven miles. The total trackage
of the U. S. Steel roads, including sidings, branches, switches, and yard
track, is 3,774 miles, every yard of it maintained in prime condition and
absolutely modern.
A line drawn from New Orleans to St. Louis, thence to Kewanee, Ill.,
through Minneapolis and north to the Canadian border would about form
the western boundary of the big Corporation’s manufacturing and mining
activities. The northern boundary would be the Canadian border (except for
one plant at Hamilton, Ont.) with the Atlantic and the Gulf of Mexico
forming the east and south boundaries. Half the United States! And another
plant is started in Canada.
All over this vast area are scattered the Corporation’s plants, but
nowhere are they so thickly clustered as around Pittsburgh, the steel city of
the world. Here the biggest of the subsidiary companies, Carnegie Steel, has

its headquarters, and here, too, is the home of the National Tube, American
Sheet and Tin Plate, and American Bridge companies. All the Carnegie
plants are in or near Pittsburgh, as are the major part of the plants of the
National Tube Co., but the Tin Plate and Bridge companies reach out in
many directions. The Chicago territory provides a home and a market for
the Illinois Steel Co. with its “South Works” plant at South Chicago and the
Indiana Steel Co., which operates the great Gary plant at Gary. The
American Steel & Wire Co. has its head office at Cleveland, but its plants
are scattered over a great many states from Illinois to Massachusetts and
down to Alabama, and it has a plant at Hamilton, Ont.
All over Pittsburgh and its environs are to be seen the stacks of the
blast furnaces of the Corporation and other steel companies in which the ore
is transformed into pig iron, the first step in the manufacture of steel. These
furnaces, usually built in “batteries” several together, are immense ovens of
steel and firebrick in which a temperature of more than 3,000 degrees is
generated and in this terrific heat the ore, fluxed with limestone, is melted
and converted into iron. From the ground to the tops of the furnaces run
“skips” or buckets on inclined tracks, which carry the ore to their mouths,
where, with a mixture of coke and limestone, it is dumped.
Soon the ore, coke, and limestone become one liquid mass of fire and
the oven, after a sufficient time, is “tapped” by breaking open a small mud-
sealed cavity at the bottom and letting the molten contents run out through
gutters into receiving ladles. The iron, being heavy, runs out first. The rest,
following, is diverted into other gutters and cooled, when it is used for
making cement, ballasting railroad tracks, and other purposes. This material
is known as slag.
Meanwhile, the iron is carried in the ladles to the mixers, huge cradles
holding 250 tons or more each of molten metal, and rocking slowly but
continuously to and fro. Into these mixers different heats of iron are poured,
and the constant motion of the mixer gradually brings them to a
homogeneous mixture, insuring uniformity in the metal.
William R. Jones, or Captain Bill as he was generally and
affectionately known in the steel trade, was for many years in charge of the
Braddock plant of the old Carnegie company and was one of the most
picturesque figures that ever flitted across the pages of the history of the

industry. Big, with a temper as hot as the metal with which he worked, but
with a heart of gold, he was an ideal leader for a steel mill army. Gifted
with unquenchable energy and enthusiasm, he acquired a habit of breaking
world’s steel-making records, and in the earlier days of his management of
the Braddock works he time and time again set the steel world agog by his
feats in the matter of production. He continued to do so until the steel
makers of Europe and America became so used to “Jones breaking another
record” that his feats went unheeded. And the mixer, which still bears his
name, was one of his many inventions.
In a letter to the writer, Andrew Carnegie said of Jones:
“Jones volunteered in the Civil War as a private and returned at its
close a Captain. You can’t keep a good man down. I wished to make Jones a
partner along with many of our pioneers, and informed him of this one
morning. His reply was: ‘I don’t want to be troubled with business matters.
You just give me a —— of a salary.’
“‘All right Captain,’ I said, ‘hereafter the salary of the President of the
United States is yours.’ And so it was.”
From the mixer the iron is taken to the converter to be turned into steel.
And now we come to the most spectacular, the most impressive sight that is
to be witnessed in the steel industry, the theme for the poet who may one
day be born to sing the Song of Steel.
A Bessemer blow, a converter in action, is a small-sized Vesuvius in
eruption, a volcano tamed and chained by man. From its great steel crater
shoot forth flames to the height of perhaps 100 feet, showering sparks in
every direction and creating a pyrotechnic display of unequalled splendor.
Its glare lights up the countryside for miles around, and the hissing and
roaring of the molten iron, or rather of the steel groaning in its birth throes,
forms a fitting accompaniment. It is a sight that once seen will never be
forgotten.

The Original Jones Mixer

Both England and America claim the invention of the Bessemer
converter, the most epoch-making of all the discoveries in the steel trade
and one that has influenced all industries, civilization itself, immeasurably.
For before it existed steel could only be made by a slow and expensive
process in small quantities, and was not available for the varied uses for
which it is employed to-day. Had it not been for the Bessemer converter,
there would have been no skyscrapers, no steel railroad cars, no steel ocean
liners, no “Steel Trust.”

A Bessemer Blow

Shortly before the middle of the nineteenth century William Kelly in
America and Henry Bessemer in England were struck by the same idea, that
air could be used as fuel, that the oxygen in air, blown through a mass of
molten iron, would burn out its impurities and would at the same time blow
them away. The records are slightly in favor of Kelly as the earlier
discoverer, although Bessemer got all the credit and a knighthood for his

work, while the American got nothing. A Bessemer converter is actually a
big retort with air holes at the bottom where molten iron is purified into
steel with air.
The first attempts at “making steel with air” met with scant success.
The pioneers of the new process encountered the same sort of opposition as
later confronted George Westinghouse when his fertile brain gave birth to
the air-brake. The youthful inventor secured an interview with Commodore
Vanderbilt, then head of the New York Central System, and endeavored to
interest him in his invention.
“Do you mean to tell me,” Vanderbilt asked, “that you propose to stop a
railroad train running at full speed with nothing but air?”
“Just that,” replied Westinghouse.
Vanderbilt turned to his secretary: “Show this lunatic out and never let
him trouble me again,” he said.
Kelly’s first attempt at purifying iron with oxygen was a failure. The
blast was too strong and the iron, along with the impurities, was blown
away in one gorgeous display of fireworks. But he was not to be
discouraged, and after many experiments got the blast right, only to find
that the metal which resulted was too soft, as the small percentage of carbon
and other alloys needed to give the steel its hardness had been taken out.
To Robert F. Mushet, a Scotch ironmaker, belongs the credit for
overcoming this difficulty. He came forward with a practical suggestion:
“Burn out all your carbon and then put back what you need to make the
metal hard.” Simple enough, but the others had not thought of it. And the
thing was done.
The hissing, roaring volcano is easily handled by one man. As he
watches the flame that pours from its mouth change from red to yellow and
finally burn white, he touches a lever which turns the huge caldron on its
axis, while workmen quickly shovel into it the required amount of carbon,
silicon, etc. The converter is then further tilted and its contents emptied into
a ladle which swings away with its load while the converter is charged
afresh with iron.
Open-hearth steel, more popularly used nowadays than the Bessemer
product, is made by a different process. As the name implies, the iron is

changed into steel in large ovens, where it is mixed with the necessary
alloys and purifying ingredients and a considerable amount of scrap. The
proper melt being arrived at, the metal, now steel, is run off into ladles.
The open-hearth method has many obvious advantages. In the first
place, it gives the steel a greater tensile strength. In the second, using as it
does about 60 per cent. of iron and 40 per cent. of old metal, it is an
important factor in conserving the natural ore resources of the country and
of the world for future generations.
Times change and steel making with them. Open-hearth is fast
supplanting Bessemer steel in all markets, and the day may not be far
distant when Bessemer will be practically a thing of the past. But it must
not be forgotten that the discovery of Kelly and Bessemer—to whose names
should be linked that of Mushet—gave birth to the modern steel industry
and made possible the age of steel. Open-hearth itself may one day yield to
another process. In fact, a prominent steel manufacturer has suggested that
electric steel will be the steel of the future.
All the newer steel plants are equipped with open-hearth furnaces. At
Gary, Bessemer is not produced at all, and even the Carnegie Steel Co.,
which probably did more than any other concern to develop the Bessemer
process, now has 133 open-hearth furnaces to 14 Bessemer converters. The
Corporation altogether has 335 open-hearth furnaces and 38 converters.
The manner in which the newer process is displacing the older is best
illustrated by some production comparisons. In 1901, the first year of the
Corporation’s existence, the subsidiary companies produced 6,109,306 tons
of Bessemer steel to 2,745,514 tons of open-hearth. It was not until 1909
that open-hearth production forged ahead, going to 7,508,889 tons against
5,846,300 tons of the other. But since that year its gain has been progressive
and continuous. In 1919, open-hearth production was 12,412,131 tons
compared with 4,788,242 tons of Bessemer.
After the iron is converted into steel by either process it is poured into
moulds some eight feet high and two feet or more in width. In a surprisingly
short time the surface of the metal becomes sufficiently solidified to permit
“stripping,” or removing of the mould, and we have an ingot, which is steel
in its first form.

If the ingot is not to be used for some time, it is permitted to harden,
but usually it is taken to what is known as a soaking pit, where, for several
days, it swelters in a high but even temperature until the entire mass of
metal attains an even heat. If used immediately after stripping, the semi-
solidified outer crust would crush and the still fluid inner portion would run
out.
From the soaking pit the ingot is lifted by immense cranes and carried
to the rolling mills, where it undergoes the various processes transforming it
into steel as we know it commercially.
So many and various are these processes that no attempt will be made
to describe them in detail. They vary from the rolling of a railroad rail or a
fourteen-inch plate of battleship armor to a wire rod about a fifth of an inch
in diameter or a sheet of tin plate such as is used in making food containers.
To the spectator all these different processes are interesting and
fascinating. Entering the mill at one end the red-hot ingot is gradually
reduced in size as it passes through roll after roll and brought to the
required shape before being allowed to cool. In one mill we may see the
mass of steel lengthened and moulded to the shape of a rail. In another, it is
brought to the form of a big “I” beam for bridge or skyscraper. In another,
to a slender roll of wire rod, and so on.
The more highly finished forms of steel naturally involve a further
series of operations. Wire rods, for instance, are drawn through dies to
smaller and still smaller sizes, and sometimes to shapes far from circular,
until they become fence wire, piano wire, watch springs, and a thousand
and one other products. Much of it goes to the nail mill, probably the
noisiest place in the world, where it is cut, sharpened, and given a head. As
stated elsewhere in this volume, the Corporation manufactures something
like eleven thousand different varieties of wire products alone.
We have now followed the ore all through its journey from the mine to
the finished product. But the mining of coal and its conversion into coke
plays as important a part in the manufacture of steel as the mining and
refining of iron. And the Corporation’s coal and coke operations are carried
on a scale in harmony with the general immensity of its steel operations. In
1916 the Corporation mined 32,768,381 tons of coal and produced
18,901,962 tons of coke.

In the early years of the steel industry the iron master did not produce
his own coke. He bought it. But as the industry became more and more
integrated it became obvious that the two operations must go hand in hand
if costs were to be kept down, and to-day most of the larger manufacturers
produce all the coke they need in their steel operations.
One of the first and certainly the most important mergers combining
steel and coke interests was that which brought together Andrew Carnegie
and Henry Clay Frick, and later resulted in giving to the Steel Corporation,
when it absorbed the Carnegie Steel Co., control of the vast coal mines and
numerous coke ovens originally owned by Frick and his associates.
Long before his death, which took place December 2, 1919, Frick had
earned the right to be reckoned as one of the outstanding figures in
American industrial history. Like many other Americans who have achieved
great success he began life without advantages, starting his business career
as an errand boy and later occupying the position of a clerk in a distillery at
Mount Pleasant, Pa., in the middle of what is now the big Connellsville
coke-producing district.
At that time the American coke industry was in its infancy. The young
clerk perceived its possibilities and out of a very slender salary, by frugal
living and many privations, saved enough to make some small investments
in coal properties. Later, when the coke industry was in the dumps, and
most of those connected with it could see nothing but disaster, Frick,
convinced of a great future for coke, managed to enlist the aid of a
Pittsburgh banker and purchased a number of properties at bargain prices,
organizing H. C. Frick & Co., which later became the H. C. Frick Coke Co.
In a few years the clerk had risen to be the dominating figure in the coke
trade.
When Carnegie decided that economical manufacture of steel implied
the acquisition of coke properties he secured control of the Frick Company
and later negotiated a partnership with Frick, merging the two companies.
Eventually, after a lawsuit and much bitterness between the two men, Frick
and Carnegie separated. But when the Steel Corporation took over the
Carnegie Company, Frick was induced to become a member of the Finance
Committee, and it is generally recognized that his financial acumen was of
enormous assistance to the big Corporation in the days before it had

established itself firmly. Frick remained a director of the Corporation and
one of the most influential members of its Finance Committee until the day
of his death.
Frick left an enormous fortune. Although he left substantial legacies to
his children and others, the mass of fortune was distributed among public
institutions for the good of the community.
The H. C. Frick Coke Co. is still the most important by far of the Steel
Corporation’s coke-making subsidiaries. It owns vast areas of land in the
Connellsville and surrounding regions near Pittsburgh, but already the
writing on the wall may be discerned. The time is coming, slowly but
surely, when the great company organized by Frick will produce nothing
but coal, when its more than 21,000 coke ovens will be cold, and will no
longer light up with their flares the blackness of the night around
Connellsville.
At the Frick coke plants coke is made by the old beehive process, in
great open ovens, row upon row, where millions of tons of coal a year are
turned into coke. But as explained elsewhere, the primitive beehive oven
process is wasteful, both as to the amount of coal needed to produce a ton
of coke and because the by-products of the coal, tar, ammonia, benzol,
toluol, etc., are blown into the air. And gradually the modern coke by-
product oven is replacing the old beehive. The Frick Company will be able
to hold its own for a long time against the process of modernization. But it
must eventually yield.
The operations of the Steel Corporation are not confined to the
manufacture of steel. They include a number of auxiliary and incidental
activities, including the production of coke by-products, named in the
preceding paragraph, a considerable volume of gasoline, all absorbed by the
Corporation itself, the operation of steamship lines, the tale of which is told
in the chapter on “Exports,” the building of ships, the control of a number
of public utilities, and so on.
And the tale of the expansion of the Corporation’s activities is not yet
told. Already it is going into the manufacture of railroad cars. Land was
acquired several years ago for a large steel plant across the Canadian
border, at Ojibway, and it is probable that the building of this plant will not

now be long deferred. In fact, it is a fairly safe assumption that the only
reason for delay in erecting it is that of present inflated costs.
While the growth of the Corporation will not be too rapid, if for no
other reason than that its management is averse to achieving anything that
might savor of monopoly, there is no question that its future development in
regard to expansion of its steel-making facilities and allied activities will
keep pace with the development of American commerce both at home and
abroad.

CHAPTER IX

THE STEEL TOWNS

P
ittsburgh, preëminent in steel, the home of the company with
which for many years Andrew Carnegie set the pace for the rest of
the world to follow in steel making; Pittsburgh, her skies blackened
with the smoke of hundreds of furnaces that produce more than one quarter
of the world’s supply of its most necessary metal, naturally comes to mind
when one mentions steel cities—she is easily the greatest of them all.

Situated in the extreme west of the state of Pennsylvania, on the border
of the great coal deposits of that state, with excellent facilities for getting
her ore and coal at comparatively low cost, and having an unsurpassed
location in respect to markets for her finished products, Pittsburgh is likely
to keep for a long time her commanding position among the steel towns.
And yet Pittsburgh is not among the towns included in the title of this
chapter. She is the world’s steel city. And this is the story of some of the
communities that owe their existence to the United States Steel
Corporation, that have sprung up as a result of the extension of its
manufacturing facilities, and in the building and management of which the
forward-looking influence of the biggest of all businesses has been
reflected.
Among such cities Gary, Indiana, holds the foremost place.
Bearing, appropriately, the name of the head of the Corporation, the
man who more than any other was responsible for its organization, and
beyond peradventure, responsible for its policies, Gary may be said to
represent, so far as a town may, the spirit of the Corporation—efficiency.

Gary’s history, to the date when this is written, covers only fourteen
years. The site of the city, on the borders of Lake Michigan, in the
northwest corner of Indiana and about twenty-five miles from Chicago,
consisted of sand dunes on which scrub oak and sage brush grew less than
fifteen short years ago. Its inhabitants were wild birds and a few hardy
hunters and fishermen, and on one memorable occasion a cave in the dunes
gave refuge to the car-barn bandits of Chicago until their surrender was
forced by the police. In 1906 the Steel Corporation’s management decided
that another steel plant was needed in the Middle West, bigger than any then
existing, and selected a desolate spot on the shore of Lake Michigan for its
location. Thus was the plant and city of Gary conceived.
The magnitude of the project and the difficulties which had to be
overcome would have appalled any but so large a corporation. The
proposed steel plant could not be operated successfully unless it had a town
to house its many thousands of employees, and the site of Gary offered not
even the ordinary facilities for town building. It had no harbor, nothing
could grow on its arid soil—these were only two of the handicaps. But the
Corporation set to work to build a city literally from the ground up, and
Gary, with a population of 56,000 to-day, and rapidly growing, was the
result.
The Corporation’s management has always shown its realization of the
fact that “not by bread alone does man live”; that the mere paying of
employees a living wage is not sufficient, and that even the least educated
worker has an aesthetic sense, even though often uncultivated, that should
be developed and pandered to within reasonable limits if the best good of
the worker and the employer is to be achieved. To make the big Indiana
sand dune attractive seemed an impossible task, but it was accomplished.
The Corporation’s engineers apparently took for their guidance the motto
that hangs in the office of the big company’s chief executive, “It can be
done,” and made Gary at least an attractive, if not a beautiful, residential
town. To do this, nearly two million cubic yards of fertile soil was brought
into the town, superimposed on the sand, and used for the laying out of
parks, boulevards, and lawns. Many thousands of trees were planted on the
soil with gratifying results.
The lack of a harbor was compensated for, and safe haven provided for
the ore boats which had to bring raw material to the proposed big plant, by

the cutting of a harbor slip five thousand feet long, twenty-two feet deep,
and two hundred and fifty feet wide, affording draft and anchorage for the
largest lake steamers afloat, and terminating in a basin of ample size to
permit these vessels to turn around. In the calm waters of this artificial
harbor, protected by a breakwater, the ore boats are unloaded at the rate of
1,250 tons an hour, the ore being conveyed from their holds to a storage
yard parallel to the slip until needed to feed the hungry furnaces.
Work on the building of the steel plant and city was started April, 1906.
To the Indiana Steel Co., a subsidiary of the Illinois Steel Co., and
especially organized for the purpose, was given the task of erecting the steel
plant, while the Gary Land Co. was organized and put in charge of the
creation of the city.
How gigantic was the task of building Gary may be gathered from its
cost to the Corporation. The construction of the steel plant and the creation
of the town has involved an expenditure of over $100,000,000, and work is
yet to do. Of the fifty-six open-hearth and other steel furnaces contemplated
in the original plan, forty-seven have been completed so far. The first heat
of pig iron was produced on December 21, 1908, and the first steel ingots
early the following year.
The Gary plant is probably the largest single steel plant in the world. It
consists of twelve blast furnaces, forty-seven steel furnaces, a rail mill,
billet mill, plate mill, five merchant mills, slab mills, an axle plant, and a
by-product coke plant of ten batteries, each of seventy ovens. With these are
auxiliary shops, machine shop, roll shop, electric repair shop, boiler shop,
blacksmith shop, etc., and the necessary electrical equipment.
Sixteen gas engines of 2,000 H. P. each, supplemented by four 3,000
H. P. steam engines, are used to operate the blast furnaces. The power
required to run the open-hearth furnaces and steel mills is supplied by
seventeen 3,000 H. P. gas engines, driving an equal number of electric
generators, the gas for these engines and for the blowing engines being
supplied from the blast furnaces. In this way the power required for the
entire plant is supplied by blast furnace by-product gas. Part of the power
generated is transmitted to Buffington, five miles away, where it is used to
run the machinery of the Universal Portland Cement Works. The rail mill is
driven by three electric motors, each of 6,000 H. P.

The annual capacity of the big plant is as follows:

TONS
Pig iron 2,173,200
Coke 3,360,000
Ingots 3,030,000
Billets, blooms and slabs 1,544,600
Sheet bars 104,000
Rails 750,000
Finished steel, including rails 1,997,900

During the construction of the plant, over 10,000,000 cubic yards of
material were excavated and over 1,200,000 cubic yards of concrete placed.
More than 150,000 tons of fabricated steel were used in its construction.
The plant covers an area of 1,250 acres, and a plot of land of approximately
the same size and adjoining the existing plant is being reserved for possible
further extensions.
Gary, the town, was incorporated in June, 1906, only a few months
after the foundations for the first buildings were excavated. At the first
election for town officials, only 33 votes were cast. Seven years later, in
1913, over 9,000 voters marked the ballots.
When the Steel Corporation decided to build Gary it determined to
make it both a modern and a model city. The town was carefully laid out by
competent engineers and ample provision allowed for growth. It now covers
several square miles. Its principal thoroughfares are Broadway, 100 feet
wide, and Fifth Avenue, 80 feet wide. These are paved with concrete block
and the other streets with macadam.
Citizens of New York and other big cities, accustomed to seeing their
important thoroughfares constantly torn up for the laying of sewers, electric
wires, etc., would find a pleasant change from these conditions in Gary,
where it is never necessary to do such work in the principal streets. All gas
and water mains and sewer pipes are laid in wide alleys between the streets
and thus all repairs and improvements can be carried on without any
obstruction to traffic.

Many pretty homes, a number of them owned by steel workers, make
attractive the residential section of the town. The Gary Land Co. has erected
a great number of these houses—1,000 or more—and these are offered for
sale at prices representing approximately the cost of the land and
improvements, with a special discount to plant employees. The prices of
these houses range from $1,500 to $25,000. The company also offers for
rent, at exceedingly nominal rates, houses built for the most part of concrete
and equipped with electricity and all other modern conveniences. All these
dwellings are attractively finished and each has its plot of green in front.
The visitor to Gary is never allowed to leave the town without seeing
the Y. M. C. A., the finest building in the city, erected at a cost of $260,000
and the gift to the town of the man whose name it bears. The building
contains a gymnasium, swimming pools, class rooms, club rooms,
dormitories, and so on. Opposite the Y. M. C. A. is the beautiful Carnegie
Library, and not far off, the Federal Building. The Gary Hospital, built and
maintained by the Corporation, is absolutely modern, both in equipment
and management, and bears favorable comparison with similar institutions
in the largest cities.
But the town, Gary, is known first and foremost as the birthplace of the
most modern and efficient educational system. The Gary plan of training
youth, with modifications, has been extensively copied in many large cities.
Unfortunately, after a rather inadequate try-out in New York City, it was
abandoned; apparently, however, chiefly because local politics made it
impossible for those in charge of the work there to get full results from the
Gary methods.
Professor William Wirt, an enthusiast on the training of youth and an
iconoclast so far as old methods are concerned, is at the head of the Gary
school system. In fact, he originated it. When the town officials and those of
the Steel Corporation took up the matter of education, they went at it in a
thorough manner and looked around for the best school principal to be
obtained. Wirt’s plans were approved, he was chosen for the post, and given
a free hand in modeling the entire system. The Emerson and Frœbel schools
were the result.
Wirt proceeded to turn topsy turvy many of the old ideas in education.
He started off with one big advantage over other reformers—he was able to

arrange all details from the beginning, even the building of the schools, in
accordance with his plan, and he worked out a scheme under which the
youth of the town enjoys a vocational training completely equipping
graduates of the school for entering practically any chosen walk in life.
But Prof. Wirt has done more than this. He has succeeded in making
education attractive for the young people of Gary.
One of Wirt’s pet theories, not one new or exclusively his by any
means, is that play is as essential to the growing boy or girl as study, and in
the schools work and play are so alternated as to double the number of
children which the school buildings would ordinarily accommodate, one
class working while another uses the playgrounds. Thus, with three school
buildings, well over 3,000 children are fully provided for on full time.
The curriculum includes all the regular school subjects, as well as many
others, including music and a number of sciences. A large auditorium is
devoted to the study of history and geography, which are combined into one
subject and inculcated with the assistance of lantern slides or moving
pictures, visualization of scenes and events being made use of to attract
interest and assist memorization. The same idea is employed in other
studies, the room devoted to natural history, for instance, being equipped
with a wide variety of stuffed animals and even with small live ones.
The range of vocational subjects taught runs from painting, carpentry,
and iron work to accountancy and architectural draughtsmanship. Each
subject is taught in a room with the proper equipment, there being a
carpenter shop, paint shop, foundry, draughting room, etc., and each trade
or profession is taught, not theoretically, but by practice. Teachers for these
subjects are not chosen from college faculties, but are skilled workers in the
different lines, and the students or apprentices to each trade make articles
used in the school itself. This serves not only to reduce the cost of
maintenance of the school but to give the pupils the interest in their work
that comes from seeing the product of their skill in actual use.
Thus, the youthful carpenters make tables, chairs, desks, etc., that can
bear comparison with high-grade factory products; the painters keep the
schoolrooms and buildings spick and span; the draughtsmen plan additions
or improvements; the accountants keep the school books. In every case a
concrete end is served to the benefit of the school and the pupil.

Nor is the female of the species forgotten vocationally. A kitchen and
lunch room are run by the girls. Here they prepare palatable dishes and sell
them to their fellow-students. Thus the young housewife gains actual
experience in the most essential department of good housekeeping. Laundry
work, sewing, and other feminine industries are similarly taught, besides
stenography, bookkeeping, etc.
In that part of the school buildings and grounds devoted to recreation
are to be found swimming pools, one for each sex, tennis courts, baseball
diamonds, swings, slides, and other aids to enjoyment loved by and suitable
to the young of all ages and both sexes. Instruction in play is just as
thorough as in study. The recreation teachers devote their entire time to this
work.
An excellent illustration of how the Gary educational system appeals to
boys and girls is afforded by the story told the writer by a foreman in the
mills of the American Sheet & Tin Plate Co., which has a large plant on the
outskirts of the town. His story, told as nearly as possible in his own words,
is as follows:

About two years ago, my nephew, left an orphan by the death of
his mother, came from Pittsburgh to my care. I had been told that
the boy was incorrigible, and would pay no attention to his studies;
in fact, that he flatly refused to go to school. And it proved the
information was correct. Arriving at Gary he would not even make a
pretense at studying, and I practically had to use force to induce him
to visit Prof. Wirt with me.
Arriving at the school the boy explained to Mr. Wirt that he did
not consider himself in need of an education as his only ambition
was to become a house painter. The Professor thereupon suggested
that he come to school and learn how to paint, assuring him that he
would not be asked to do anything he objected to. Naturally the boy,
who was never so happy as when pottering around with a paint
brush, accepted the suggestion.
The first day he was given a pot of paint and a brush and put
under the care of a painter. In a short time he was fairly adept at
laying on color. Then, one day, Mr. Wirt called him in and informed

him that some of the classrooms were to be redecorated in several
colors and that, in view of his progress, he would be put in charge of
the job provided he could make a satisfactory estimate of its cost.
That was a stumper. The boy confessed his inability to estimate,
and the necessity for a knowledge of mathematics being thus forced
upon him, took up the study enthusiastically. Gradually he was
brought to appreciate the advantage of other studies.
To-day that boy would miss his breakfast rather than be late for
school. It would take a padlock and chain to keep him away from
his studies. And so far as I can find out, he is taking pretty nearly the
whole curriculum.

Prof. Wirt has been strongly supported in his methods by the Steel
Corporation officials.
Gary is growing rapidly. Two Corporation subsidiaries, besides the
Indiana Steel Co., already have plants there. These are the American Sheet
& Tin Plate Co. and the American Bridge Co. The American Locomotive
and American Car & Foundry companies both big railway equipment
manufacturers, not connected with the Steel Corporation, are said to be
planning the erection of plants in that vicinity. The Gary Screw & Bolt Co.,
one of several local enterprises, has a plant for making bolts, nuts, and
screws, and employs 800 men.
No less than six trunk lines, the Lake Shore & Michigan Southern,
Baltimore & Ohio, Wabash, Michigan Central, Pennsylvania, and Nickel
Plate, connect with Gary. Smaller roads entering the town are the Lake
Shore & South Bend Ry.; Gary & Southern; Gary, Valparaiso & Eastern;
and Gary, Hobart & Eastern. The Elgin, Joliet & Eastern, a Steel
Corporation road, has a large freight yard near the steel works.
A village in 1906, Gary is now a city of the second class, having
attained that rank in April, 1915.

Interior of Gary School

Citizens of Gary have always been ashamed of one thing about their
town. This, appropriately known as the “patch” is a small section thrusting
itself wedge-like into the heart of the city, and being full of saloons and
dives. The site of the patch was not acquired by the Corporation, because of
some question as to validity of title, so the big company has no power of
restriction over its development. Gary men have long hoped that some
means of cleaning up the section would be found. Prohibition seems to be
doing it.
Away up in the northeast corner of Minnesota, on the shore of Lake
Superior, is Morgan Park, another steel city, named after the great banker
who financed the organization of the Steel Corporation. This town is one of
the latest developments and contains many new and interesting features.
The engineers who laid out Morgan Park were able to use Gary as a
model and to improve on that city in many respects, particularly as the
demands on the new settlement in the matter of population would be much
smaller than was the case at Gary and it was possible to develop the town
along suburban residential lines.

Perhaps the most interesting feature of Morgan Park is the provision
made for children. In no other town in the world are there as many
playgrounds per capita. Each block has its own playground for small
children, provided with swings, slides, sand piles, and so on, and thus the
little ones in every part of the city are able to enjoy the advantages of
outdoor play under the eyes of their parents and without their having to
cross a street.
For older children and for such adults as still keep up personal interest
in athletics there are many places where they may indulge in tennis and
other sports, and these give the workers in the mills and their families
greater and more varied opportunities for physical recreation than are
enjoyed by the inhabitants of most larger and more pretentious cities.
To the visitor Morgan Park presents an unusually attractive aspect. The
streets are all laid out in curves, beautifully parked, and the effect of this to
the eye is entirely pleasing. Altogether, the physical aspect of the settlement
is more that of the exclusive suburbs of some big city than what one
ordinarily conceives to be a steel town usually associated with grime and
smoke.
Like all the other Steel Corporation developments Morgan Park has a
modern, thoroughly equipped hospital, Y. M. C. A. and other advantages
above those which a city suburb usually boasts.
Morgan Park is really a suburb of Duluth and is part of that
municipality. But while it is under the city government it enjoys the various
advantages mentioned because of the direct influence of the Corporation
which spends a large amount in beautifying the town, providing
playgrounds, etc., and which keeps a corps of trained workers to promote
welfare work of various kinds within its confines. Just as in Gary which,
though a self-governing city, displays in all its activities the influence of the
big corporation. J. P. Morgan, Jr., paid the total cost of the beautiful and
commodious Y. M. C. A. building.
And throughout the State of Minnesota are a number of small towns
which, in somewhat the same sense, may be classed among the Steel
Corporation towns. That is, although self-governing municipalities they
owe the majority of their improvements, such as hospitals, to the
munificence of the Corporation which employs most of their inhabitants

and sees to it that its employees shall have all possible opportunity for
comfort and social betterment. Hibbing, Coleraine, Eveleth—all these are,
in the true sense, steel towns.
One of the great problems that has faced the Corporation in building
the towns or settlements to house its mill workers has been that of the
bachelor, or the man who has come to this country to work leaving his
family in Europe or elsewhere. A large percentage of steel workers belong
to one or other of these two classes, and it has been a difficult matter to
devise a means of giving these men decent and respectable living
accommodations with as many of the comforts of home as possible at a
price within the means of the worker with his hands. In different
communities different plans have been tried. In Morgan Park the
Corporation erected large boarding houses with some of the advantages of a
club but the success of these has not been as great as was hoped for.
Ellwood City, near Pittsburgh, where the National Tube Co. has one of
its big seamless tube plants, probably comes nearer to solving this difficult
problem than any other point. Here the Tube Company maintains what is
really a men’s hotel, with excellently kept bedrooms, club rooms, etc.,
rented at a cost of a few dollars weekly to the workers. The hotel, boarding
house, or club, call it what you will, is located but a few steps from the big
restaurant maintained by the company. Thus the boarding-house menu is
avoided while the worker, tired out with his day’s toil, is spared the
necessity of a long walk for his evening meal.
Down below the Mason and Dixon Line conditions are considerably
different from what they are in the North. In dealing with the white worker
of Minnesota, Ohio, Pennsylvania, and other states the Corporation has
sought to avoid anything that smacks of paternalism. It has simply provided
the worker with certain advantages, leaving as much as possible to him the
management of these. But in the South, with a large percentage of the
workers colored, it has been necessary for the Tennessee Coal & Iron Co.,
the Corporation’s southern subsidiary, to manage directly the affairs of the
settlements of its workers.
Although among the smallest of the steel towns Westfield, Ala., is one
of the most important from the sociological standpoint. It is a development
devoted exclusively to the negro, its entire population being black, and it

seeks to give the colored worker who resides there advantages identical
with those which his white brother enjoys elsewhere.
Situated in a little valley, amid rolling hills, the town slopes down from
all sides to a big common, the most noticeable feature of which is a large
and well-kept baseball park. Around this centre are grouped two excellent
schools, community houses, and other buildings used as social centres,
while, divided by winding roads, the well-built houses of the town straggle
in all directions, half-hidden by the southern foliage, along the sides of the
hills.
It need hardly be pointed out that a development of this character has a
broad and important economic aspect. The negro constitutes a substantial
percentage of the American population. In the South he predominates. But
until now the negro has never enjoyed any advantages or the opportunity
for social betterment. In Westfield he has such an opportunity and while,
temporarily, the town must be managed by white brains it is almost certain
that, in time, the negro residents of this delightful village will learn to
manage their own affairs and will do so. And unless the writer
misunderstands the spirit of the Steel Corporation, it will put every
encouragement in their way to that very end.
Fairfield, Ala., but a short distance from Westfield, has been called the
South’s model industrial city, and also the “city of homes.” Situated like the
negro village, on softly undulating ground amid the luxurious southern
foliage, the site chosen for Fairfield offered its builders an excellent field
for achieving artistic effects in its layout, and they did not fail to make use
of the opportunity. Like Morgan Park, although almost within a stone’s
throw of the steel mills, it presents the appearance of an exclusive suburb.
Its well-paved streets are shaded by green trees through the leaves of which
peep out the fronts of cosy-looking modern houses. Even the trolley cars
running through its principal streets fail to disturb its peaceful charm.
To describe the many “steel towns” scattered all over the eastern half of
the American continent would be impossible, as it would be to discuss the
problems presented by local conditions in each case. Broadly speaking, the
Corporation, wherever it has built to house its employees, has sought first
of all the comfort and happiness of these workers and not its own gain. And
it has always borne in mind that comfort and happiness are æsthetic as well

as physical, and built accordingly. In the older steel centres the Corporation,
as it has not built from the ground up, has naturally not been able to
introduce into the communities as many basic improvements as has been
possible in the newer developments. But it has in every case sought to
improve existing conditions, always with the workers’ comfort, health, and
happiness as its goal.
The H. C. Frick Coke Co. has set itself the task of making attractive the
coal-mining towns of the Connellsville region. By the usual corporation
methods of sanitation, of making personal and community cleanliness
easily attainable, it has raised very materially the standard of living in the
coal towns, and the standard of management of the towns themselves. It has
even managed to make many of these towns attractive—if the reader has
ever been through coal-mining regions he will appreciate the size of this
achievement—by encouraging gardening by means of prizes and so on, and
by fostering community pride. It has set new community standards in the
coal districts.
To the late George G. McMurtry must be given much credit for the
movement for bettering conditions in industrial centres. Over 30 years ago
Mr. McMurtry conceived and laid out a model city in the environs of
Pittsburgh for the workers of the American Sheet Steel Co. The town laid
out by the former head of the Sheet Steel Company will stand as a lasting
monument to him, though it does not bear his name—Vandergrift, Pa., the
first of the steel towns.

CHAPTER X

HUMANIZING INDUSTRY

O
f all the problems with which industry is confronted none is more important
or more difficult of solution than that of establishing proper and
harmonious relations between the man who works with his hands and the
individual or corporation who pays him his wage. Upon its solution depends to a
large extent the settlement of the whole vast problem of capital and labor. And the
proper treatment of the worker has been a question to which the management of the
Steel Corporation has applied itself with energy almost since the organization of the
big company.

To claim for the Corporation complete success would be an exaggeration. The
problem is one that has been growing ever since the dawn of the industrial era and
obviously cannot be settled, if at all, without many years of effort and of mutual give
and take. To expect any employer, or group of employers, to achieve immediate
success in solving the difficulties that naturally arise between capital and labor would
be absurd.
No one questions the right of the man who works with his hands to decent living
conditions, a wage that will give him the opportunity to live with a certain degree of
comfort and permit him to bring up his children decently. Most, if not all, modern
employers recognize this right and are willing, even anxious, to accord it to the men
in their employ. But it has been by no means easy to decide just what are the best
steps to be taken to attain the desired ends. And, it must be stated regretfully, the
necessary coöperation on the part of the workers themselves is often lacking. There is
often a tendency on the part of wage earners to regard with suspicion any steps taken
for their betterment by employers.
It must be remembered that the industrial era is practically in its infancy still. It
was naturally some time after the birth of the era that the evils it brought in its wake
came to be recognized and steps could be taken to combat them. To-day every sound
thinker on economics realizes that the welfare of the industrial worker and of industry
itself are inseparably associated, and that industry cannot attain its highest

development unless the worker gets a fair share in its profits and an opportunity for
self-development.
It is comparatively easy for the successful employer—that is, successful from a
financial viewpoint—be he individual or corporation, to spend money with a view to
improving the living conditions of his workmen. It is not an easy matter to do this in a
manner that will preserve the self-respect of the worker. And it is of the utmost
importance that this self-respect should not be injured in any way. Paternalism, or
anything that looks like it, must be studiously avoided.
About the year 1906, the Steel Corporation initiated a campaign of Safety,
Sanitation, and Welfare. The enormous success that it has attained in preventing
accidents and deaths in its plants is easily demonstrable statistically. The benefits
resulting from its sanitation campaign are also obvious to any one visiting the steel
districts. It is not so easy to point definitely to the good results from the welfare
campaign, but there is no question that they are more far reaching than either of the
others. The greatest of the three is welfare.
The term “welfare” is used to include practically every activity designed to make
life more livable for the worker and his wife and children. It includes education,
housing, club activities, and a host of other things.
While the policy of the Steel Corporation in regard to improving the living
conditions of its employees is the same wherever the big company’s subsidiaries
operate, the methods adopted differ in each locality with the varying conditions
presented. It would be impossible in the scope of this work to give details of the
multitudes of courses adopted in the name of “welfare,” but a few examples will
serve to give a general idea of the work that is being attempted.
The greatest enemy of mankind is ignorance; hence the work that the Corporation
is doing along educational lines may justly be regarded as the most important of its
operations for ameliorating the workers’ lot. It is not always possible for the
Corporation to take direct charge of the education of the young, the children of its
employees, nor does it wish to do this directly. But in those localities where
municipal, county, or state educational facilities are poor, it has gladly assumed the
burden. The most striking instance is the work conducted along these lines by its
southern subsidiary, the Tennessee Coal, Iron & Railroad Co.
In fact, the work of the Tennessee Co. along all lines of welfare is particularly
worthy of description. This does not imply any invidious comparison; it simply
means that the southern company had a more virgin field to work on and therefore
has been able to lay out a more comprehensive and definite programme.
But to return to the question of education of the workers’ children. When the
Steel Corporation, in 1907, purchased control of the Tennessee Coal, Iron & Railroad
Co., it found conditions decidedly unfavorable, especially in two respects: education,

and the treatment of the colored worker who constituted the major part of the
common labor supply of that section.
The schools in Jefferson County, Alabama, where the mines and mills of the
Tennessee Company are located, were in an exceedingly poor condition in every
respect. The buildings in many instances were dilapidated and the inadequate pay
offered teachers failed to attract men and women competent to train the youthful
mind.
After a thorough study of the situation, President George G. Crawford, of the
Tennessee Company, took up the question with the county authorities and an
arrangement was finally arrived at by which the company was to build and equip a
sufficient number of schoolhouses in the neighborhood of its plants and mines. The
county agreed to turn over to the company the annual appropriations for teachers’
salaries in the neighborhoods affected, these sums to be supplemented by the
company with an amount sufficient to pay the type of teacher which the company’s
officials desired to obtain.
As a result of this agreement there are to-day, in every place where the Tennessee
Company operates, well-constructed, thoroughly ventilated, modern, and attractive
schoolhouses for white and colored children, combined with the most modern
equipment for teaching. The instructors in charge are of a high average type and the
schools are recognized as having no equals in the South.
How successful the Tennessee Company’s management of these schools has been
is evidenced by the fact that when the Steel Corporation, through the southern
company, began the erection of its big shipbuilding plant at Chickasaw on Mobile
Bay, in the neighboring county of Mobile, the authorities of that county proposed to
the company’s officials that they enter into a similar agreement in respect to
education in that section and a plan, in all essential respects the same, was drawn up
and agreed to.
The educational work in the South is not confined only to children, whom it takes
from kindergarten to the end of the grammar school period.
The schoolhouses are made centres for general community activities, or in some
cases special buildings are erected for this purpose. The community work includes
cooking, sewing, housekeeping, and similar classes for the wives of employees, club
and social activities, athletics, etc. An important function is the maintenance of
libraries for workers and their families. The popularity of these libraries is growing
rapidly and the type of literature demanded by those who use them indicates not only
a desire on their part for self-instruction but an unexpectedly broad and intelligent
interest in the problems and events of the period.
Before passing on from the South, let us take a brief glance at what is being done
for the colored people of that section by the Corporation.

The negro has not heretofore had a fair chance in the South for bettering himself.
The Tennessee Company has endeavored and is still strenuously endeavoring to give
its colored employees an equal opportunity with their white brethren. Although
separated, as desired by both whites and colored, the educational facilities it offers the
children of the negro workers are identical with those afforded the youthful whites.
The community activities are in all respects similar, and in fact, in every way the
colored worker at the Tennessee plants and his family have just as much opportunity
to live decently and to develop as the white.
At Fairfield, Alabama, the Tennessee Company maintains a hospital, recently
erected, which, except in mere size, compares favorably with any institution of its
kind in the world. The building, costing over $1,000,000, has accommodation for 334
patients, one half being for white and one half colored. The surgical equipment is the
last word in modernity, and the wards and private rooms are splendid examples of
good lighting and ventilation and the other factors that go to make a sick room
comfortable. The roof of the hospital is a large esplanade where convalescent patients
may in fair weather enjoy the southern air and sunlight and a view of miles of
beautiful rolling country in every direction.
It is a far jump from Alabama to Minnesota geographically. The educational and
general welfare problems that confront the Corporation in the Northwest are
essentially different from those it faces in the South. In fact, in the Northwest the
Corporation’s subsidiaries have nothing to do directly with education, which is in
charge of the local authorities. The steel companies merely meet the bills through
paying at least 85 per cent. of the taxes in the sections in which they operate. But their
managements take a keen interest in the educational work being done, and though the
taxes are heavy and the local authorities seem over-extravagant in their expenditures
for education, the steel interests do not grumble. They take the attitude that even if
taxation is heavy, it could not be for a better cause.
The small mining towns of northern Minnesota, which, as already stated, depend
almost entirely on the Steel Corporation and other steel companies for their revenues,
are profligate in regard to education. Their school buildings are imposing. It is not
uncommon for a town of 1,000 or so inhabitants to spend three or four hundred
thousand dollars for the erection of schools. In one instance at least a splendid garage
is attached to the school building, and buses are maintained, giving the children free
motor transportation, morning and afternoon, between their homes and the school.
And teachers’ salaries are high.
The Corporation’s welfare activities are naturally restricted in this territory, due
to the fact that the section is prosperous, and the workers there of a more independent,
self-reliant type than those of the South. But the Corporation does all it can in the way
of promoting healthful recreation and other similar social work such as club houses,
the maintenance of hospitals, etc.

In another chapter of this volume the city of Gary, Indiana, and its scheme of
education has been discussed at some length, and therefore it need not be taken up
here. The Gary educational plan has been adopted in all essentials at Morgan Park,
where the Minnesota Steel Co. has its big plant.
In the older steel sections, such as Pittsburgh, Chicago, and Youngstown, the
Corporation’s subsidiaries coöperate as far as they may with the local authorities, in
improving educational conditions. In all these sections a somewhat similar plan of
welfare is carried out. In some locations, visiting nurses or domestic instructors are
maintained at the expense of the company. In others, the Corporation maintains
schools for teaching foreign workers the English language and American ideas and
ideals. In every part of the country where any of the Corporation’s subsidiaries has a
plant no expense is spared to improve living conditions generally and to make up any
local deficiencies for education and social betterment.
Housing of workers is another great problem that confronts industry. The
Corporation, wherever its subsidiaries operate, has always endeavored to provide its
workers with comfortable and sanitary houses at moderate rentals. So far has it gone
in this respect that it is seriously open to question whether it has not overshot its mark
and created new evils.
In the South, in the Connellsville region of Pennsylvania, where it gets the mass
of its coal supplies, in Youngstown, Gary, Morgan Park, and other sections, it has
built thousands of houses—the figure given as of January 1, 1920, is 17,553
dwellings and boarding houses—for rental at low rate to employees. The rents on
these dwellings are so low that the average rental receipts are only about 1½ per cent.
of the actual cost of construction. This is not enough to cover taxes and upkeep, let
alone depreciation and a reasonable return on the investment. These low rentals are in
effect tantamount to an addition to wages. The adverse side of them, however, is that
they discourage private construction enterprise, which cannot hope to compete with
the Corporation’s rentals, and also remove all incentive to the worker to own his own
home.
For years the subsidiary companies have constructed houses and sold them to
employees on an easy-payment plan, but it was only recently that a general
comprehensive plan was developed along these lines for all subsidiaries.
The housing plan varies slightly with the conditions of each case, but generally it
permits employees to purchase or build a home on small initial payments, with
installments running from ten to fifteen years, and with an interest rate of 5 per cent.
on the unpaid balance.
How varied are the activities of the Corporation in regard to welfare work is
illustrated by a list of the facilities constructed or installed for various purposes, as
presented by Charles L. Close, manager of the Corporation’s Bureau of Safety,

Sanitation, and Welfare, at a meeting of the American Iron & Steel Institute in New
York in May, 1920. The list was made up as of January 1st of that year. The following
are some of the principal items: Number of dwelling and boarding houses constructed
and leased to employees at low rentals, 27,553; churches, 25; schools, 45; clubs, 19;
restaurants and lunch rooms, 64; rest and waiting rooms, 210; playgrounds, 131;
swimming pools, 11; athletic fields, 96; tennis courts, 107; sanitary drinking
fountains, 3,077; pipe systems for drinking water, 369; protected wells and springs,
647; comfort stations (complete units, either bath or dry houses, closets, wash or
locker rooms) 1,495; showers, 2,672; clothes lockers, 116,749; base hospitals, 25;
emergency stations, 286; company surgeons, physicians and internes, 167; outside
surgeons on salary, 107; nurses, 189; visiting nurses, 68; teachers and instructors,
222; safety inspectors (spending entire time on safety work) 101; employees who
have served on safety committees, 25,948; employees now serving on safety
committees, 5,500; employees who have been trained in first-aid or rescue work,
16,801; employees now in training, 801.
Many of the above statistics are concerned principally with strictly sanitation and
welfare work. While on the topic of statistics, however, it might be well to give Mr.
Close’s figures of the Corporation’s expenditures on those activities that come under
the operation of the bureau which he heads. These expenditures, from 1912 up to the
end of 1919, are: Welfare, $11,751,429; Sanitation, $11,732,666; Accident
prevention, $6,530,706; Relief for injured men and families of men killed,
$22,652,238; cost of employees’ stock subscription plan, $9,160,000; pension fund
payments in excess of income, provided by permanent fund, $1,824,693; for creation
of permanent fund, $8,000,000; total, $71,651,732.
A sum of $5,113,570 paid in pensions to employees, but derived from the fund
originally established by Andrew Carnegie, is not included in the above total.
In organizing welfare activities the Corporation’s officials work on the theory
that it is infinitely better to help people to help themselves than to give them
something that savors more or less of charity.
One department of the work that has met with encouraging success is the
development of home and community gardens. Practically every worker has in the
front or rear of his home a small amount of vacant land, but unless he is offered some
incentive to cultivate this, he is apt to let it remain bare and serve for the
accumulation of rubbish.
Realizing that such a state of affairs was not only a waste economically, but was
inimical to the physical and mental welfare of the worker, a plan was evolved to
induce him to cultivate these vacant areas. The offering of small cash prizes was
found sufficient to give the necessary impetus to this work, and the result is that a
great many of the workers’ homes are now surrounded with flower or vegetable
gardens to the cultivation of which the men and their families give much of their

spare time. From a financial viewpoint these gardens are profitable to their
cultivators, regardless of the prizes offered for the best-kept ones. The mental and
spiritual benefit derived from them cannot be measured, but there is little question
that it far exceeds the financial gain.
In many localities, where housing conditions do not permit gardens, the
Corporation’s subsidiaries utilize unoccupied land in the mill district, plow the
ground, plot it out, and then hand it over to the employees to cultivate, again with the
incentive of cash prizes for the most successful results. Last summer more than 3,000
acres of land were thus utilized.
Many of these community gardens are made the especial care of the children,
who take a great interest in the work and who often achieve results of which their
elders might well be proud.
Children, in fact, occupy an important place in the welfare scheme. They are the
workers of to-morrow, and every effort is made to permit them to develop healthy
minds and sound bodies. Children’s playgrounds are equipped and maintained in a
great many mill centres, and instructors are employed to devote their whole time to
assisting the children to get the best possible benefits from these. Many of these
playgrounds have swimming pools, in some cases one for the older and one for very
small children, with swimming instructors in charge, and a visitor in the summer
needs only the evidence of his eyes to convince him that the little ones make regular
and excellent use of them.
The care of the worker’s health is one of the most important considerations of the
Bureau of Safety, Sanitation, and Welfare. Sanitary measures are general in every
mill. There is not a single plant of the Corporation but is equipped with modern
facilities for washing, and experts in sanitation give their time to improving these
methods whenever possible. Every suggestion that tends to diminish the risk of
contagion or of diseases caused by unsanitary conditions, occupational conditions,
etc., is adopted and there is a keen rivalry among the different plants to establish
some new improvement which the others lack. In almost every plant the visitor is
shown some idea or contrivance in the way of sanitation with the boast that this was
first used at that plant. All of which makes for a constant improvement in the health
of the worker.
Drinking water generally is thoroughly purified and piped through the mills so as
to be at all times easily obtained by the men. Cups, with their possibility of contagion,
are eliminated. Fountains, with guards to make it impossible for the drinker’s lips to
touch the outlet, are substituted.
Most, if not all, of the comfort rooms maintained at the plants are equipped with
shower baths and every workman has his private locker where he keeps soap, towels,
and a change of clothes.

The results of these measures are not reflected only on the health of the men. The
worker who is able at the end of a strenuous day’s endeavor in a hot mill or a coal
mine to enjoy a cool shower and leave the plant clean and comfortably dressed must
necessarily be a more self-respecting member of the community than he who has to
return to the bosom of his family grimed with the sweat and dirt of his day’s toil, and
his family also benefits, both in self-respect and comfort. It was a difficult job for the
wife to maintain a pride in her home under the conditions that once existed in the
steel districts.
Cleanliness is far-reaching in its results. It benefits not only those directly
affected but the entire community.

Ore Cars at Proctor Yards

There is one aspect of the sanitation work that is hardly obvious, but nevertheless
important. America is the great melting pot of the races. History has shown that it
normally takes several generations in the crucible to produce the out-and-out
American. And cleanliness, probably more than anything else, is the birthright and
symbol of the American. Many of the foreign races that flock to our shores are
regrettably lacking in this respect, but they learn quickly. And the more quickly we
can accustom them to the idea of the necessity of personal cleanliness the more
speedily will they become real Americans and good citizens.

General View of Duluth Ore Docks

Which all harks back to the question of self-respect. The American is naturally
self-respecting and independent. And his accustomed use of soap and water is no
small factor in making him so. And the Corporation’s welfare workers see to it that its
employees shall never lack soap and water.
Incidentally, among the many activities of the Welfare Bureau is that of
instruction for citizenship. This includes the teaching of the English language to
foreign workers, instructing them in American ideas and institutions, and assisting
them in obtaining their naturalization papers. Foreign workers’ wives are instructed in
American standards of housekeeping and in the proper care of their children, and
every effort is made to encourage and assist the foreign-born worker to realize the
opportunities that this country offers to all and to enable him to take advantage of
them.
As the world grows older and wiser and civilization progresses, old ideas are
being discarded one by one, and nowhere is this more noticeable than in the realms of
business and industry. Principles of doing business, once held as cardinal, have in
many cases later been recognized as immoral, not only from the human, but from the
economic standpoint.
The old trading doctrine of caveat emptor, or “let the buyer beware,” is no longer
relied on by reputable merchants. They realize that the man who hopes to build up a
sound, steady business must take upon his own shoulders the responsibility for what

he sells both as a question of honesty and policy. Another principle which may be
called “let the worker beware,” one which laid down the law that the industrial
worker was supposed to be cognizant of whatever risks were involved in his
employment and to assume these risks himself, is gradually being legislated out of
existence, compensation laws of recent years taking the burden of the dangers of
industrial employment off the shoulders of the worker and placing it where it rightly
belongs, on the industry.
But the United States Steel Corporation did not wait for the law-makers to force
upon it the assumption of this liability. Cheerfully and voluntarily, it accepted for
itself the onus of accidents in its plants before a single state of the Union had passed a
Workmen’s Compensation Act.
More, the compensation relief plan for injured workmen, adopted by the
Corporation in 1910, has served as a model for a number of states in drawing up
liability legislation, and is more liberal in some respects than the plans of most, if not
all, states.
Yet though the Steel Corporation, as evidenced by its action in putting its
compensation plan in force, heartily approves of the theory of industrial liability
legislation, the big company’s management is strenuously opposed to certain forms
that state legislation sometimes takes. One of these is state insurance, the objection
being that this takes away from the employer all incentive to adopting measures for
accident prevention. For compensation, after all, is not a cure but a palliative. It does
not strike at the root of the disease; and in the final analysis, the important thing is the
prevention of accidents rather than payment for them after their occurrence.
In this respect the up-to-date employer has gone much further than legislators. He
has gone to the very heart of the industrial accident question by taking what means he
could to eliminate, or at least to minimize, the risks incidental to the industry in which
he is engaged. He subscribes to the slogan “safety first,” safety even before profit, for
he is beginning to realize that accidents are uneconomic and unprofitable, and that
their prevention, even if apparently costly at the beginning, must pay in dollars and
cents in the final showing. In other words, the modern employer of labor is becoming
convinced that safety methods, or insurance before accident, are as necessary as are
measures to prevent fire instead of relying upon fire insurance companies to make
good losses from conflagration.
Although individual effort to minimize industrial hazards had been made by
some companies before the Steel Corporation existed—notably in the case of some of
the very companies merged into the “Steel Trust”—the Corporation may with reason
claim the distinction of being the real pioneer of the safety movement. For not only
did it organize, systematize, and enormously expand the work of the several
companies, but it championed the cause of safety, and trumpeted it to the industrial
world.

Through its example, as well as by means of a vigorous campaign carried on by
the Safety, Sanitation, and Welfare Bureau, it preached the doctrine of “safety first,” a
slogan originated by the Illinois Street Co., to all. The largest employer of labor in the
world, by its adoption of such a policy, forced the recognition of this policy upon
industry generally, and as a result of the safety campaign inaugurated by the
Corporation in 1906, safety-first methods and appliances are generally employed in
every steel mill in the United States to-day, and, in fact, by a vast number of plants
devoted to other industries, and they have spread and are still spreading to other
countries.
The results of the work of the Corporation’s Safety committees are at the disposal
of whoever cares to avail himself of them. A Safety Museum is maintained at 71
Broadway, New York, the Corporation’s executive headquarters, and from this centre
the work of promoting safety radiates to every part of the industrial world.
Further, the efforts of the Corporation have resulted to a great extent in educating
the worker to expect and demand that every reasonable precaution be taken to protect
him from pain and injury, his family from the loss of its head and wage-earner, in
teaching him to seek safety for himself and to recognize the right of his fellow-
workmen to it.
From the aspect of liability, accidents may be divided into two broad classes as
recognized by law—injuries due to the worker’s own carelessness, and those
attributable to the negligence of his employer. But the Steel Corporation, in its
accident relief plan, which supplements its safety work, makes no such distinction. It
recognizes only that the worker has been temporarily or permanently prevented from
earning a livelihood, or that his family has suffered, and it compensates for the loss
without question as to where the blame lies.
In order to secure the best results, economically and otherwise, from its safety
campaign, it was obvious that the mere setting up of safety guards, warnings of
danger, etc., was not sufficient. It is just as necessary that the worker should be taught
to take advantage of the safeguards provided him, to regard the seeking of safety as a
duty he owes to himself, his family, and his fellow-workmen. In its campaign for the
prevention of accidents the Corporation has sought to accomplish both these ends,
and the educational work has been by far the most difficult.
How much so may be gathered from the fact that after many years of instilling
the doctrine of safety into the workmen, investigation showed that nearly 50 per cent.
of all accidents occurring in the Corporation’s mines or plants were indisputably
traceable to indifference or thoughtlessness on the part of the men themselves. The
worker is inclined to regard with something of disdain the risks incidental to his
occupation. Often he deems it rather cowardly to seek to avoid these risks.
Indifference to danger is too often accepted by the thoughtless as a hallmark of
personal courage, and indifference to the dangers of one’s employment as a sign of

experience and skill. Just as a small boy will jump on a moving car to “show off,” the
worker will often incur unnecessary risks for the same reason. A railroad man will
board a moving engine from the middle of the track simply because to do so seems to
indicate that he is past the apprentice stage. It is to such causes that a large percentage
of industrial accidents are due, and the employer of labor, in instituting a safety
campaign, generally finds that the greatest problem he faces is to persuade the worker
that such indifference to danger is childish, and that real skill and efficiency lie in
doing things in the correct, which is synonymous with the safe, way.
The Corporation’s safety work may be divided into three parts: organization,
safety devices and danger warnings, education.
It goes without saying that to get the best results in any campaign, efficient
organization is essential. The Corporation has organized a central Safety Committee
under whose charge the general work of prevention of accidents falls. Each subsidiary
company has its own Committee on Safety, and there are further sub-divisions into
sub-committees at each mill or mine. It is the duty of the sub-committees to see that
all safety rules are obeyed, and to make suggestions for furthering the cause of
accident prevention, while the main committees receive and act upon these
suggestions and attend to the financial and other aspects of the campaign. For the
prevention of accidents costs a good deal of money, the Corporation having
expended, from 1906 to 1919, about $11,000,000 in this work alone. But the
necessary funds are never stinted. Judge Gary’s promise that the Finance Committee
would recognize any practical step undertaken for reducing the risk of injury to the
workmen, and would vote the wherewithal to pay for it, has been scrupulously kept.
So as to bring home to every worker the safety idea, the personnel of the sub- or
mill-committees is constantly changed with the view that each worker will sooner or
later take part in the promulgation of safety. Figures already quoted show that 101
inspectors spend their entire time on this work, 25,948 employees have served on
safety committees, and 5,500 were thus serving at the end of 1919. This practice of
changing the members of the mill committees, more than anything else, educates the
men to think safety for themselves and for others.
Installation of devices designed to make accidents impossible, or at least
extremely improbable, on machines that had previously been prolific causes of
injuries to workmen, was naturally the first work of the Safety Committee. It was the
obvious step. The educational campaign came later, as it became evident to those
engaged in the work that the saving of the worker from injury lay largely in his own
hands. Once this was recognized, the educational work was taken up enthusiastically,
and to-day forms the most important side of the “boost-for-safety” campaign.
Print and paint are used liberally to keep the idea of caution before the mind of
the worker at all times. Safety warnings are painted here and there in conspicuous
places in the mills and mines, and at the entrance to many plants there are big display

signs, electrically illuminated at night, on which changing mottoes serve constantly to
impress the idea on all and sundry. Blank walls, pay envelopes, and all available
spaces that may be printed or painted on are impressed into the work.
A million dollars, in round figures, is spent annually by the Corporation in the
erection of safety appliances. The men are encouraged to suggest ideas for the
prevention of accidents of however trivial a nature and these are all given careful
consideration, and the records show that something like nine out of ten of them are
used. The safety workers have adopted this motto: “Not only is an ounce of
prevention worth a pound of cure, but it is better to have a pound of prevention than
an ounce of cure.”
So numerous and varied are the safety devices that have been developed over the
course of years that it would be impossible to describe them in detail. They run from
guards on the handles of wheelbarrows, to prevent fingers being crushed in passing
through a doorway, to appliances for derailing cars in danger of collision; guards over
exposed flywheels, belts, and other moving parts of machinery; enclosed ladders to
prevent falls; goggles to safeguard workers’ eyes from explosion of metal or flying
chips, and subways under railway tracks to eliminate the danger of crossing the rails
in a busy yard.
Although a workman who invents a marketable safety device may secure a patent
on it if he desires, the Corporation itself never patents, being only too glad to put at
the disposal of other employers every means it can to assist them in eliminating
accidents. Its management holds that the safety campaign, while good economy, is
largely humanitarian, and should not be commercialized.
For several years past the Safety Committee of the Steel Corporation has been
trying to make the safety idea universal, and it has put into use a danger signal which
has been adopted by a number of industrial organizations in this country. This signal
is a plain red ball, innocent of lettering. It is pointed out that this sign, speaking no
language and therefore speaking all tongues, can, by educating the worker of the
world, be made understandable everywhere and at all times, and will therefore be
especially serviceable in promoting safety among foreign workers. The adoption of
the red ball of safety was urged upon the International Convention for the Prevention
of Industrial Accidents which was held at Milan some years ago, and it has been
accepted and put into use by such organizations as the American Iron & Steel
Institute, the National Metal Trades Association, National Association of
Manufacturers, as well as by a large number of railroads and manufacturing concerns
of one kind or another.
The satisfactory results of the safety-first campaign are demonstrable statistically.
Taking 1906 as a basis, this being the year of its inception, the number of serious or
fatal accidents in 1918 and 1919 was reduced 46.84 per cent. notwithstanding the fact

that the figures for recent years include a number of accidents that were classed as
minor injuries in 1906. The following chart speaks for itself.

ACCIDENTS
1906–1919 INCLUSIVE

PER CENT DECREASE IN ACCIDENT RATE UNDER 1906— Saved from
PER 1,000 EMPLOYES Serious Injury
1906 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
1907 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 10.40% 832 1907
1908 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 18.21% 783 1908
1909 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 25.28% 1,236 1909
1910 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 43.49% 2,215 1910
1911 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 41.26% 2,012 1911
1912 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 35.05% 2,023 1912
1913 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 38.29% 2,273 1913
1914 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 40.52% 1,748 1914
1915 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 43.54% 2,145 1915
1916 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 31.60% 1,957 1916

1917 ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 41.63% 2,891 1917
1918 ■■■■■■■■■■■■■■■■■■■■■■■■■■ 46.84% 3,094 1918
1919 ■■■■■■■■■■■■■■■■■■■■■■■■■■ 46.84% 2,944 1919
Total 25,853

A change in the system of reporting accidents made Jan. 1, 1911,
resulted in more accidents being reported and classed as serious than
formerly was the case

UNITED STATES STEEL CORPORATION.
BUREAU OF SAFETY, SANITATION & WELFARE.

In fourteen years a total of 25,853 men saved, by educational work and by the
taking of precautions, from serious injury, many of them from death. Probably two-
thirds of the number had wives and children, and so some seventeen thousand
families were saved from sorrow, from the loss of or injury to their heads. But this is
not all. The figures represent the saving accomplished in the mines, mills, and so on,
of the Steel Corporation itself. No account can be obtained of the number of men
employed by other steel companies, or in other industries, who, by reason of the
example set by the Corporation, were saved from death or loss of limb. And the safety
campaign is yet in its infancy. The men who are devoting themselves to it look
forward to the day when the only accidents that shall occur will be those that may be
said truly to be unavoidable, and the number of men killed or injured in industry will
have been reduced to a minimum.
A concrete example of the results of the safety programme is afforded by
comparing the figures for accidents in the coal-mining industry in the United States
and other countries with those in the Corporation’s mines.

DEATHS PER MILLION TONS PRODUCED
1915 1916 1917 1918 1919
Scotland 3.35 4.32 4.03 4.55
South Wales 5.84 5.51 6.72 6.48
Great Britain 4.38 4.39 4.70 5.24
United States 4.27 3.77 4.14 3.80 4.24
H. C. Frick
Coke
Company 1.75 1.89 2.20 2.38 2.81
TONS COAL PRODUCED PER DEATH

Scotland 298,342 231,627 248,266 219,870
South Wales 171,174 181,634 148,822 154,312
Great Britain 228,402 227,807 212,652 190,998
United States 234,297 265,094 241,618 262,873 235,918
H. C. Frick
Coke
Company 567,098 528,735 493,188 419,758 363,844

N.B. Figures for Frick Coke Co. (United States Steel) and for United
States apply only to underground workers. Figures for other countries
include workers above ground where casualties are lower.

Has the Steel Corporation really gained from its large expenditures for safety
work? That it has secured returns in the way of loyalty and increased efficiency can
hardly be doubted; but has there been any tangible monetary saving? The economy in
the matter of compensation payments saved is sufficient to answer this question. A
careful calculation made several years ago by the Safety Bureau showed that had the
same number of accidents occurred in the three years, 1911–1913, as occurred in
1906, when the safety campaign was organized, the big company’s disbursements, as
a result, to the injured workmen and their families would have been several millions
of dollars more than the entire amount expended in safety work. The aggregate saving
to date would probably run well into the tens of millions.
The gain in production that is derived from increased safety in manufacturing
processes is also an important financial consideration. In the first place, every
accident means a more or less prolonged interruption, possibly a complete though
temporary cessation of operations, with a consequent loss. Next, it means that a new
man must be trained to fill the place vacated by the injured worker. It will be a happy
day for industry when every employer realizes that the injury of a workman is as
harmful, from the viewpoint of profits alone, as a breakdown of a piece of machinery.
The human machine is no less important than that made of steel or wood. And safety
appliances are insurance against the breakdown of that machinery.
It is the first step that counts. Once started on the job of saving the employees of
the Corporation itself from injury and mutilation the ambition of the men in charge of
this work extended and reached out through the steel trade, then to other industries
and finally to other countries.
Strictly speaking, safety should be classified under the general head of “Welfare.”
But in practice a distinction must be drawn between what may be considered the plain
duty of the employer to prevent needless accidents—a duty to the workmen and a
duty to himself—and the work that reaches out and, by bettering the worker’s lot
generally, benefits his family and the community in which he lives.

Work of this character grows of its own impetus. It is doubtful if the
Corporation’s management, when it first outlined its propaganda for helping
employees to lead happier and healthier lives, realized how far afield it would be
carried, how many different activities the work would come to include.
Each step accomplished suggests another and often a bigger. As the welfare
campaign progresses its workers become imbued with enthusiasm, make more
demands upon the Corporation’s finances to carry out their ideas. And so the welfare
programme has taken on a broad scope, has a wide horizon, and will have a still
wider one as the years roll by.
Those in charge of the welfare and safety work, whether at the mills or at the
Corporation’s headquarters, do not claim, nor for that matter do any of the
Corporation’s officials claim, that the work is entirely altruistic. They are perhaps
rather too inclined to emphasize its importance purely from the efficiency standpoint.
It is impossible to judge motives, and generally those behind any course of action are
more or less mixed. The outside observer, however, studying the operation of the
Safety and Welfare movement, and noticing the enthusiasm of those engaged in it,
cannot but be convinced that the deeper motive behind it is an unselfish one. The
consideration that the employer benefits financially from the health and happiness of
his employees is there, but it occupies a decidedly secondary place.
It is difficult, perhaps impossible, to demonstrate statistically that welfare work,
as distinct from safety work, is financially beneficial to the employer; that the
Corporation has received any tangible return for the large sums it spends yearly to
give its workers the opportunity to lead cleaner, healthier, happier, and broader lives.
But no work thus done can fail to give the doer a return, full measure and
overflowing.
The stock subscription plan, discussed in the early part of this work, is in reality a
part of the welfare programme. It has a two-fold object: that of creating a direct
personal interest on the part of the worker in the Corporation’s affairs, and that of
encouraging thrift among the men and women employees, setting their feet on the
first rung of the ladder of success.
All welfare work, in the end, whether it be the salvation of the worker from
accidents, the teaching of individual or community hygiene, the care of the sick,
financial compensation for the injured, the teaching of languages, trades, sciences, or
the inculcation of thrift, has for its object the making of better men and women, the
giving to the worker born under unfavorable social conditions the opportunity to lift
himself above these conditions. And from this both the employer and employed must
benefit together.
But every other consideration aside, welfare work had paid in the satisfaction that
the management and the stockholders of the great industrial enterprise feel in the

knowledge that they have given the man who works with his hands, not in the
Corporation alone, but industry generally—for where U. S. Steel leads, others follow
—better working conditions, cleaner homes and communities, and better educational
facilities for their children. In the satisfaction of knowing that, by this work, better
citizens are being made, and finally, in the realization that it has helped to bridge the
chasm that separates capital from labor.
Sooner or later the time must come when it will be recognized that what is
known as “welfare work” is a simple duty that industry owes to labor. If it is not
freely accorded, the working man will eventually demand that his work and his home
be surrounded with those conditions, tangible and intangible, that make for decent
citizenship, for self-respecting manhood.
If industry as a whole, as the Steel Corporation has already done, will recognize
without compulsion these rights it will go a far way toward smoothing out the
differences that exist between capital and labor, toward eliminating radical agitation
and Bolshevism. It must offer this practical recognition of the workers’ rights as
evidence of its claim that the real interests of the man who works with his hands and
of him who pays him his wage are identical.
Welfare work is the humanizing of industry. It may prove the salvation of
industry.

CHAPTER XI

INVESTIGATIONS AND DISSOLUTION SUIT

O
n March 1, 1920, the Supreme Court of the United States handed
down a decision acquitting the United States Steel Corporation
from the charge of the Government that it was a combination in
restraint of trade, bringing to an end litigation that had cost both the
Corporation and the Government many millions in cash and had for nearly
nine years thrown a threatening shadow on the steel industry and on
American business as a whole.

The decision, moreover, wrote the final chapter to a record of
investigations of and political attacks against the Corporation that had
lasted almost since its organization.
An immensity from its conception, an undertaking so vast that its
actions and policies, good or ill, reflected their results for the industrial
weal or woe, not of a single community but of the whole American people;
conceived and born, further, at a period when the thoughts of the nation
were directed toward the menace that was believed to exist in trusts against
the body politic and when politicians and economists were bending their
energies toward a study of the question of big business, it was but natural
that investigations of one kind or another, but all directed toward the one
end of finding out whether the big company’s existence was a danger to the
country or not, should have played an important part in the history of the
United States Steel Corporation.
While United States Steel, its actions and its policies, have earned the
commendation of thoughtful students—perhaps even the majority of the
public, and many public speakers and writers have expressed this, probably

no other organization has enjoyed or been subjected to so much—and
generally such unconsidered—criticism as has the Steel Corporation. Even
the Standard Oil and the American Tobacco companies, big and prominent
as they were and as much as they have been attacked for their methods of
eliminating competition, have failed to strike the public imagination as
forcibly as the so-called Steel Trust. There were two main reasons for this.
To the mind of the student of economics the activities of the Steel
Corporation bore more importance to the public welfare because of the part
that steel plays in making or unmaking the prosperity of the country, the
importance of iron as one of the resources of the nation. The steel trade is
the industrial barometer of the country and this is because steel enters into
almost every line of activity. So far as the public was concerned the very
size of the Corporation constituted its weakness. Its billion-dollar
capitalization captivated the imagination, compelled attention. What men do
not understand they are apt to fear, and how many can understand the
import of such a vast sum? As the majority opinion of the U. S. Supreme
Court says:—“The Corporation undoubtedly is of impressive size and it
takes an effort of resolution not to be affected by it or to exaggerate its
influence.”
And because it was so easy to inflame the public imagination with the
very mention of the “Steel Trust,” the Corporation became a shining mark
for the attacks of demagogues who recognized in it an excellent net for
snaring votes.
This does not mean that all the attacks on the big Corporation have
been the work of demagogues. Some have been originated by men entirely
sincere in their conviction that so great an enterprise was inherently
dangerous to the well being of the country at large. But it was generally
overlooked that the power to do harm implies an equal power to work good,
and the question resolves itself in the final analysis to an individual one.
What were the powers of the Steel Corporation and how were they used?
The investigations, ending in the suit for the dissolution of the “Steel Trust”
and its absolution by the Supreme Court, have brought to the light of day all
the actions of the big company, have submitted them to the glare of pitiless
publicity, and the vast industry has been judged not alone in the courts but
at the bar of public opinion. What have been these investigations, why were
they instituted and in what have they resulted?

On June 18, 1898, an investigation into the question of trusts and their
relation to labor and, in fact, their effect on the country generally, was
decided on by resolution of Congress. A committee, known as the Industrial
Commission, was appointed to make the investigation. This commission
was composed of five members of the Senate, five members of the House
of Representatives, and nine others, assisted by a large corps of experts in
economics. The committee did not finish its work until the later part of
1901, its report being presented on December 5th of that year. So that the
Corporation began its existence during the life of the commission and came
in for a certain amount of study on its part. As the report, generally
speaking, was an academic one and as it dealt very little with the
Corporation, it may be passed over here.
The first investigation bearing directly upon the methods or practices of
the Steel Corporation was begun during the administration of President
Roosevelt. James R. Garfield, appointed Commissioner of Corporations in
the Department of Commerce and Labor when the department was
instituted early in 1903, was instructed by the President to investigate
various large corporations and in the course of this work he directed his
attention to the steel trade. About 1905 Mr. Garfield began an investigation
of the Corporation and the work was carried on until some years after he
had resigned his post and become a member of the Roosevelt cabinet.
The report of the Commissioner of Corporations on the steel industry
was made by Herbert Knox Smith, who held the post under President Taft.
Approximately two years were spent by Mr. Garfield in this
investigation. Some years later, testifying under oath, he stated that the
management of the Corporation had put no obstacle in the path of the
investigation, but that on the contrary Judge Gary had ordered that all
information he demanded be given. Further, Mr. Garfield said that the head
of the big company had asked him to inform him if anything contrary to law
was discovered during the investigation as it was the desire and intention of
the management to meet the law fully and to correct any abuses if they
existed. Mr. Garfield, apparently, could find no cause of complaint, for he
reported to the President that he had discovered nothing that necessitated
that the Department of Justice be informed with a view to instituting
proceedings.

Further, Mr. Garfield declared, in questioning competitors of the
Corporation, steel consumers, and railroad traffic managers, he had found
no indication of the crushing of competition which would have been
revealed by complaints of competitors as they had been in the case of other
“trusts,” no signs of discontent among consumers, and no evidence of
rebating, used by some big concerns as a powerful weapon in eliminating
competition.
On July 1, 1911, the report of Mr. Smith was submitted, through
Secretary of Commerce and Labor Charles Nagel, to President Taft. Mr.
Smith’s report was an exhaustive and complete study of the Corporation.
One may find fault with his conclusions, but the work is without equal as a
compendium of facts and statistics regarding the Corporation.

(Upper) Ore Boat Unloading

(Lower) An Ore Train

In some respects the Smith report was unfavorable to the Corporation,
although the Commissioner made no claim of suppressed competition. His
criticisms were leveled principally at the big company on the two points of
over-capitalization and the matter of the Hill ore lease.

Ore Boats at Duluth Docks

Mr. Smith claimed that the tangible assets of the Corporation at the
time of its organization were $682,000,000 against which $1,400,000,000
of securities were issued. At the end of 1910, he said, tangible assets had
increased to $1,187,000,000 and securities issued to $1,468,000,000. As
already pointed out Mr. Smith’s calculations did not allow fully for ore
property values, worth hundreds of millions.
The reader will remember that, in an earlier chapter, it was pointed out
that the over-capitalization of the Corporation did not admit of doubt, an
assertion proven by its practical admission by the management of the
Corporation who put $500,000,000 of earnings into new construction for no
other apparent reason than to equalize capitalization and property values.
Yet Mr. Smith’s figures appear somewhat too drastic. Some of the reasons
for this belief have been stated before, but it is pertinent to point out that, in
the 1910 valuation, Mr. Smith indicates that the main point of divergence is
that of ore reserve values, and on this point it would be safe to say that the
mass of opinion in the steel trade, that is the mass of competent observers,
would support the Corporation’s figures.

That Mr. Smith’s criticism of the Hill lease was well taken seems to be
proven by the decision of the directors to abandon the lease, although
another reason for this action was to be found in the gradual decline in the
metallic content of the ore as operations proceeded. Yet the question as to
whether the undertaking of the lease was intended, as Mr. Smith thinks, to
keep out competitors, or merely to secure a safe ore reserve for the
Corporation, must always remain a matter of opinion. As the Corporation’s
entire history fails to indicate a desire to crush or to keep out competitors, it
appears only fair to give it the benefit of the doubt in this instance. On one
point, however, the lease is open to criticism; it seems to have been an error
of business judgment.
But the work of the Commissioner of Corporations was being done
quietly, and in the meanwhile the public were being kept keenly interested
in the trust question and politicians were waging active war against the
trusts. The evidence brought out in the Standard Oil and Tobacco suits
served to inflame public indignation against big business generally and “Hit
the trusts!” became almost a shibboleth for political advancement. It was no
wonder, then, that the “Steel Trust” should be criticized and it should be
questioned why no action had been taken against it, the obvious answer that
it had not violated the law being one which would hardly have satisfied the
masses and certainly one that politicians were not going to advance under
the circumstances. Public sentiment on the trust question, moreover, was
being kept at fever heat by a certain class of publication, and it was small
wonder that so rich an opportunity was seized upon by politicians. On May
4, 1911, a resolution, proposed by Representative Augustus O. Stanley, of
Kentucky, calling for an investigation of the United States Steel
Corporation, was introduced into the House and passed, and a committee of
congressmen headed by Mr. Stanley was appointed to undertake the work.
The other members of the committee, which became known as the Stanley
Committee, were:
Charles L. Bartlett, of Georgia, Democrat; Jack Beall, of Texas,
Democrat; Martin W. Littleton, of New York, Democrat; D. J.
McGillicuddy, of Maine, Democrat; Augustus P. Gardner, of Massachusetts,
Republican; Henry G. Danforth, of New York, Republican; H. O. Young, of
Michigan, Republican; John A. Sterling, of Illinois, Republican.

The committee shortly began its work and in the course of its
investigation summoned as witnesses the heads of the Corporation and of
various independent steel companies, experts in economics, consumers, and
a host of other witnesses. The greatest publicity was given to these hearings,
but the Corporation, although practically put on trial, could not avail itself
of the usual recourse of a defendant, could not call witnesses on its own
behalf.
On August 2, 1912, the Stanley Committee presented its report, or
rather reports, for there were several. The majority report, signed by
Messrs. Stanley, Bartlett, Beall, and McGillicuddy, was a sweeping
condemnation of the Corporation, its organization and its methods. This
was a matter of little surprise as the entire method of conducting the
investigation was sufficient to convince the unprejudiced mind that the
effort of the investigators was not so much to find out whether the
Corporation had been influential for good or evil but to prove that it was
actually a violator of the law.
Practically everything the Corporation ever did was condemned in this
report. Among the items that came for particular criticism were over-
capitalization, the bond conversion plan, the Hill ore lease, the Union-
Sharon purchase, the Gary dinners, the Tennessee purchase, the
Corporation’s attitude toward labor unions and toward labor generally, and
interlocking directorates.
According to the report the Corporation played an important and
dangerous part in influencing legislation, particularly in helping to
disseminate literature in favor of a high tariff. The letters produced in
support of this charge, however, do not seem to be very convincing proof,
indicating that no means other than perfectly legitimate ones were used to
assist in maintaining the tariff on steel products, the necessity for which all
steel men were agreed on.
In regard to the purchase of the Tennessee Coal, Iron & Railroad Co.,
the Stanley Committee asserted unequivocally that George W. Perkins, a
Morgan partner and a member of the board of directors of the Steel
Corporation, deliberately attempted to precipitate a run on the Trust Co. of
America with the purpose of forcing the interests in control of the
Tennessee company to sell. The details of the deal and the events connected

with the run on the trust company have been discussed in the chapter
devoted to the Tennessee purchase.
On the question of interlocking directorates the majority of the Stanley
Committee expressed their grave apprehension of its menace to the country
and pointed out that the Corporation, through its directors, had
representation on the boards of railroads capitalized at $10,265,000,000;
banks and trust companies whose capital, surplus, and undivided profits
aggregated $3,315,000,000; industrial concerns capitalized at
$2,803,509,000; and express, steamship, and terminal companies
capitalized at $2,272,000,000.
Finally, the committee demanded that the railroads owned by the Steel
Corporation be segregated from it as a matter of public necessity, the
ownership of these roads giving the Corporation a great advantage over
competitors.
A minority report, signed by Augustus P. Gardner, Henry G. Danforth,
and H. O. Young, concurred with the main report in some particulars but
suggested that the majority had singled out incidents to bolster up its
arguments without regard to their relative unimportance, the result being an
overdrawn picture of the iniquities claimed to have been perpetrated by the
Corporation. While the second report unequivocally condemned the
organization of the Corporation as an attempt by the Morgan interests to
eliminate competition against the steel companies in which they were
concerned and to do away with the ever-present menace that Andrew
Carnegie was supposed to be, it said that the actual control of the actions of
the great combine had been put into the hands of “exceedingly competent,
although perhaps not altruistic, managers who have subsequently made it a
success.”
The minority report also pointed out that significant fact that the price
of steel, as based on a representative list of products, had declined from
$38.80 a ton before the Corporation was formed to $36.11 in 1911.
Finally, the minority members did not favor the dissolution of the
Corporation, merely contenting themselves with the suggestion that it be
put under Federal control. Incidentally, such control over all corporate
activities has been frequently urged by Judge Gary, head of the Corporation.

This did not end the list or reports as Representatives Young and
Littleton each appended his personal views, both of which were favorable
to the Steel Corporation in many respects.
A year or more after the presentation of the Stanley Committee reports
some interesting events calculated to throw a new light on the causes that
led to the inception of the investigation transpired. A man known as David
Lamar (an assumed name on his own confession), one who bore so
unsavory a reputation in financial circles that he was styled “The Wolf of
Wall Street,” came forward with the assertion that he himself had written
the Stanley resolution for investigation and had used it, or attempted to do
so, as a club over the heads of the Morgan interests. This failing, he had
sent the resolution to Stanley through Henry B. Martin, secretary of an
association called the Anti-Trust League, and the Kentucky congressman
had introduced it into the House.
Lamar’s story was confirmed by Martin and by Edward Lauterbach, a
New York lawyer. It was followed by a denial on the part of Stanley who
pointed out that the resolution was offered originally by him in 1910, a year
before the time of its passage upon its second introduction, whereas
Lauterbach had said that Lamar showed him the resolution in 1911. The
record of the Senate committee which heard the Lamar evidence, however,
shows that Lauterbach stated he had seen the resolution as early as 1908, or
thereabouts, and that he thought it had been offered to the House in 1910.
Upon a suggestion from a senator, who apparently was not cognizant of the
fact that the resolution had been presented unsuccessfully a year before its
passage, that it did not come before the House until 1911, Lauterbach
corrected his date. Under the circumstances this correction was natural,
although the original testimony was the more reliable.
However ignorant Stanley might have been of knowledge of Lamar’s
authorship of the resolution, and however sincere his motives in bringing it
before Congress, the connection of “The Wolf of Wall Street” with the
matter, which seems fairly conclusively proven, was in itself sufficient to
give a sinister aspect to the whole investigation, to suggest that its inception
was the result of base motives.
Following the Stanley investigation came the Government’s Steel
dissolution suit. That the one grew out of the other is easy to believe. In

fact, it would be difficult to think otherwise. The United States Steel
Corporation had been organized, had done business, and prospered under
successive Republican administrations. It had been investigated by the
governmental departments charged with such work but these had failed to
find sufficient evidence to warrant the bringing of a suit against the big
company. The Stanley resolution was passed by a House controlled by a
Democratic majority and the measure had been applauded by a large body
of voters who had been taught to believe by their political advisors that all
big business was necessarily evil. The Republican Party was facing grave
danger of defeat in the coming elections of 1912 and the advantage the
investigation had gained for the Democrats among the class of voters
referred to could only be offset, it seemed, by a political “grand-stand play”
of the same nature. Here, again, we come to a question of motives, but all
the evidence obtainable seems to show that this was at least one of the
reasons why, on October 26, 1911, the Attorney-General for the United
States, George W. Wickersham, caused to be filed at Trenton a suit for the
dissolution of the United States Steel Corporation.
It cannot be said that the suit surprised any one. The country at large
had long wondered why no action had been taken against the Steel
Corporation; why this great combine alone seemed to be immune from
attack by the Federal authorities. Those unfamiliar with its conduct and
policies and knowing it only as the biggest of the “trusts” could attribute the
immunity only to political influence, while those better informed, although
believing that the Corporation’s entire history had been such as to render
attack futile, all violations of the law having been carefully avoided by it,
and that the Corporation was not a monopoly in restraint of trade, felt that
the force of popular opinion must sooner or later result in a suit.
In the Government’s charges were reiterated practically the same
complaints found against the Corporation in the Stanley report; and a
complete dissolution was asked for. The Corporation replied denying in toto
all the charges and asserting its innocence of any violation of the Sherman
Anti-Trust Act.
Jacob M. Dickinson, former Secretary of War in the Roosevelt cabinet,
was put in charge of the prosecution, assisted by Henry E. Colton. An
imposing array of legal talent was lined up on the Corporation side, its
counsel including Joseph H. Choate, John G. Johnson, Francis Lynde

Stetson, Richard V. Lindabury, Cordenio A. Severance, David A. Reed, and
Raynal C. Bolling. The actual conduct of the case was principally in the
hands of Messrs. Lindabury, Severance, and Reed.
Hearings before a Special Examiner were ordered and these began in
New York early in 1912. Many months were consumed in the hearing of
testimony on either side, and it was not until the spring of 1914 that the last
of the witnesses was examined. Among those called to testify were former
President Roosevelt; prominent steel men like John A. Topping, E. C.
Felton, Joseph G. Butler, Willis L. King, Charles M. Schwab, James R.
Bowron, Frank S. Witherbee, W. H. Donner, A. F. Huston, Edwin R.
Crawford, A. W. Thompson, Karl G. Roebling, James A. Campbell, C. W.
Bray, W. W. Lukens, John Stevenson, Jr., and a host of others; prominent
economists like Professor Jeremiah Jenks and Dr. Francis Walker;
financiers like Oakleigh Thorne, of the Trust Co. of America, George M.
Reynolds, and others; directors of the Corporation including Judge Gary,
James A. Farrell, J. H. Reed, Percival Roberts, Jr., Daniel Reid, and so on,
not to mention a vast array of railroad purchasing agents, heads of large
steel-consuming companies, and many others among whom may be
mentioned James R. Garfield and Lewis Cass Ledyard.
A large part of the testimony was devoted to events far preceding the
organization of the Corporation, it being the intent of the government
counsel to show that not only was the Corporation restraining trade but that
the very elements of which it was composed, the companies absorbed by
the great merger, were themselves organized in violation of the law. As the
hearings progressed the conviction that the Corporation would emerge from
the ordeal of prosecution successfully became more prevalent, the evidence,
to the lay mind, all supporting its denial of any violation of the law. The
witnesses called for the defence were unanimous in declaring that the big
company, far from restraining competition, had fostered it, and this point, in
effect, was the very nub of the matter. Even the witnesses for the
prosecution, many of them, took the same attitude.
It was in listening to this testimony, or the greater part of it, that the
writer conceived the idea of recording the history of the great Corporation.
Here was a mass of data, the sworn statements of prominent and reliable
business men, a foundation that could not be excelled for a work of this
character. From this mass of evidence, in large part, have been taken the

facts stated in this history. The records in the dissolution suit, in fact,
contain the whole story of the Corporation up to the year 1911. Hence it
would be vain to review in detail all the testimony here.
The arguments of counsel for both sides were presented to the U. S.
District Court, and for months the business world waited anxiously for its
decision, one that would have a very far-reaching effect not on the
Corporation or the steel trade alone, but on business generally. For it was
felt that a decision adverse to the defendant would mean that mere bigness
was considered illegal and that no large corporate enterprise would be
allowed to exist, however free from evil its course of action might be. If the
Steel Corporation was adjudged a monopoly in restraint of trade, it was
thought, then all big business was doomed, for the Corporation, certainly,
had sought in every way to meet fully the requirements of the law.
It was not until June 3, 1915, that the Court rendered its decision, the
most favorable to big business ever handed down in an anti-trust suit,
denying the petition of the Government and completely absolving the Steel
Corporation from the charge of monopoly. The decision was unanimous, all
the judges being in entire agreement that the Corporation was not, and
never had been, a monopoly in restraint of trade.
All four of the judges concurred on the main point at issue—that of
trade restraint. A minority opinion, signed by Justices Woolley and Hunt,
expressed some divergence of thought on minor points, which we shall
come to. In the meantime, let us examine some extracts from the main
opinion, signed by Judge Buffington, presiding, and Judge McPherson.
“As trade is a contest for it between persons and the gain of that trade
by one means the loss of it to another, it follows that the person who best
knows whether the man who gained it gained it fairly, is the man who lost
it. If there is monopoly we can find proof of it from business competitors.”
“For of the conduct of the Steel Corporation, the views of its
competitors are the best gauge. Monopoly and unreasonable restraint of
trade are, after all, not questions of law, but questions of hard-headed
business rivalry, and whether there is monopoly of an industry, whether
trade is subjected to unreasonable restraint, whether there is unfair
competition, are facts about which business competitors best know and are
best qualified to speak. And it may be accepted as a fact that where no

competitor complains, and much more so, where they unite in testifying that
the business conduct of the Steel Corporation has been fair, we can rest
assured there has been neither monopoly nor restraint. Indeed, the
significant fact should be noted that no such testimony of acts of oppression
is found in this record as was given by the competitors of the Tobacco or
Standard Oil companies in the suits against those companies. We have
carefully examined all the evidence given by competitors of the Steel
Corporation. We have read the testimony of customers who purchased both
from it and from its competitors. Its length precludes its recital here, but we
may say its volume, the wide range of location from which such witnesses
came, and their evidently substantial character in their several communities,
make an inevitable conclusion that the field of business enterprise in the
steel business is as open to, and is being as fully filled up by the
competitors of the Steel Corporation, as it is by that company.”
Next the Court turns to “that most injurious feature of monopoly’s
wrong to the public, to wit, increase in the price of its product or a
deterioration in quality.” It disposes of the question of quality first thus:
“No dispute arises under the proofs. They are simply uniform that, both
with independents and the Steel Corporation, there has been a steady
bettering of quality in steel products.”
The question of prices it discussed at some length and intimated that
there had been no evidence presented to show that the Corporation had
unduly raised prices, while a large number of steel consumers had agreed in
testifying that active competition in prices for steel existed between the
Corporation and the independent companies, which would alone indicate
that prices had been only such as ordinary business practice warranted. The
Court added: “The Steel Corporation has adopted a policy of price publicity
and adherence, somewhat analogous to the freight-rate stability followed by
the railroads under the directions of the Interstate Commerce Commission.”
Next the Court considered the subject of restraint of trade in the export
or international field and found that: “we are warranted in holding that the
foreign trade of the Steel Corporation, its mode of building it up, and its
retention when built up, are not contrary to the Sherman Law. To hold
otherwise would be practically and commercially to enjoin the steel trade of
the United States from using the business methods which are necessary in

order to build up and maintain a dependable business abroad, and if the
Sherman Law were so construed, it would itself be a restraint of trade and
unduly prejudice the public by restraining foreign trade.”
On the charge that the inherent nature of the Corporation was
monopolistic, that the object of its organizers in bringing it together was for
restraining trade the Court says, in part:
“In view of the fact that the proportionate volume of competitive
business has increased since the Steel Company was formed and that the
proofs show no attempt by it to monopolize it to the exclusion of its
competitors, to now attribute to those who formed the Corporation an
intended monopolization would be to say that, having formed the
Corporation for the purpose of monopoly, they immediately abandoned
such purpose and made no effort to accomplish it.”
The Court disposes of the matter of the purchase of the Tennessee Coal,
Iron & Railroad Co., and of other purchases of steel properties criticized by
the Government, by saying: “We cannot but feel, in the light of the proofs,
that they were made in fair business course and were, to use the language of
the Supreme Court in the Standard Oil case, ‘the honest exertion of one’s
right to contract for his own benefit unaccompanied by a wrongful motive
to injure others.’”
Perhaps the most important point of divergence between the two
opinions lies in the fact that Justice Woolley, with whom Justice Hunt
concurred, held that it was the original purpose of the organizers of the
Corporation to restrain trade. These judges found, however, that the big
company did not attempt to exert a power, if it possessed it, to destroy its
competitors; they say: “Upon the finding that the Corporation, in and of
itself, is not now and has never been a monopoly or a combination in
restraint of trade, a decree of dissolution should not be entered against it.”
In denying the petition for a dissolution of the Corporation the Court
stated that it would, if requested by the Government, retain the bill of
complaint to restrain further action of this sort by the defendant corporation.
Metaphorically, business drew a sigh of relief when the decision of the
lower court was made public, a relief, however, chastened by the
expectation that an appeal to the Supreme Court was certain. But so clear

and unmistakeable were the findings of the District Court, so little question
seemed there to be in the minds of the judges, that no evidence of monopoly
or restraint of trade existed that the final issue was awaited with confidence.
An appeal was filed in course of time—October 28, 1915. And for long
thereafter both sides girded their loins for the final effort. The case was
eventually argued before the Supreme Court on March 7–14, 1917, and
later the Court ordered a re-argument, the date for the re-argument being set
for May of that year.
Meanwhile, the war that had been devastating Europe for three years
had at last reached out to the United States and this country had become
engaged in a conflict in which the industrial resources and financial
strength, to say nothing of the patriotism of the Steel Corporation, were of
enormous value and assistance.
Doubtless the Government’s attorneys realized this fully. Doubtless
they were aware that, if the Court should grant their plea and the
Corporation be dissolved, the breaking up of the great organization would
so disorganize its activities that it could not continue, during the dissolution
process, the tower of strength it was in carrying on the war. So, on the
ground, well taken, that the conclusion of the suit might disrupt the
financial situation, the Government asked for and obtained a postponement,
although opposed in its plea by the Corporation which was anxious to clear
itself before the world as early as might be.
And so it was not until after the return of peace, eight years after the
suit was initiated, that final arguments were presented (October 7–10, 1919)
and not until March 1, 1920, that a final decision was rendered, absolving
the Corporation and dismissing the suit, as already stated.
The Corporation’s victory in the Court of Last Resort was a rather
narrow one, four of the judges agreeing on dismissal of the Government’s
appeal, while three favored the Government’s side. Two members of the
Court did not sit in the case and took no part in the decision, Justice
McReynolds, who had been Attorney-General of the United States during
the progress of the litigation, and Justice Louis Brandeis.
The judges voting for affirmance of the judgment of the lower court
dismissing the bill were Justice McKenna, who delivered the opinion, and

Justices Holmes, Van Deventer, and Chief Justice White, while the minority
opinion was written by Justice Day and concurred in by Justices Pitney and
Clarke.
On the question of the close division of the Court it might be pointed
out that, of eleven (excluding Justices McReynolds and Brandeis who took
no part in the matter) judges who sat on the case, four in the District Court
and seven in the Supreme Court, a total of eight were in favor of the
Corporation.
Compared to the opinion of the lower court that of the Supreme Court,
considered either as a literary effort or a comprehensive summing up of the
issues involved, is somewhat disappointing. A few pertinent facts were
emphasized by Judge McKenna, however, and these are well worth alluding
to.
Referring to unanimous testimony of both competitors and customers
that the Corporation’s trade methods had been not only legal but essentially
fair and, if the word may be used, sportsmanlike, as contrasted with the
Government’s claim that competitors were oppressed, Justice McKenna
said:
“The situation is indeed singular, and we may wonder at it, wonder that
the despotism of the Corporation, so baneful to the world in the
representation of the Government, did not produce protesting victims.”
So obviously beneficial to American industry had been the
Corporation’s activities in the export trade that even the Government’s
attorneys did not attack it on this score, in fact, they suggested that the
export organization should be preserved. On this point the Supreme Court
majority opinion said:

We do not see how the Steel Corporation can be such a
beneficial instrumentality in the trade of the world and its
beneficence preserved, and yet be such an evil instrumentality in the
trade of the United States that it must be destroyed.

And in concluding the opinion:

We are unable to see that the public interest will be served by
yielding to the contention of the Government respecting the
dissolution of the company or the separation from it of some of its
subsidiaries; and we do see in a contrary conclusion a risk of injury
to the public interest, including a material disturbance of, and, it
may be serious detriment to, the foreign trade. And in submission to
the policy of the law and its fortifying prohibitions the public
interest is of paramount importance.

In the final paragraph we have the nub of the whole matter. The
dissolution of the Corporation would have been contrary to the public
interest. Its preservation distinctly was in the public interest not only from a
foreign trade or other economic standpoint but on purely sociological
grounds.
Not satisfied with the decision the Government’s attorneys shortly
afterward moved for the reopening and rehearing of the case, but this appeal
was promptly and unequivocally denied by the Court, thus definitely and
finally settling the matter.
To the management of the Corporation, and particularly to Judge Gary,
who was responsible for, and had accepted the responsibility for, its actions
good or bad, the decision was more than gratifying. Its effect was not
merely sentimental, however. The decision, freeing the Corporation from
the stigma of illegality and, by inference, endorsing its policies, left the big
company at liberty to develop and expand within the legitimate lines it had
always followed.
For nine years the Corporation had been hampered by the shadow that
was hanging over it. It was prevented from engaging in new enterprises that
might have been favorably considered by its directors as any plans for
future development might at any time have been brought to nothing by an
adverse decision. It is yet too early to see any direct result of the new
freedom, but it is a safe presumption that, now enjoying it, the Corporation
will not fail to make use of it for the financial gain of its stockholders and
for the economic good of the United States.

A Trainload of Ingots in Molds

CHAPTER XII

QUESTIONS OF POLICY

A
lmost since the date of its organization the activities of the Steel
Corporation have been guided by a definite set of policies. At the
beginning, when the Corporation was going through what might
be described as its “tooth-cutting” period, this was, perhaps, not the case, as
there was, as suggested elsewhere in these pages, a lack of concordance on
its Board on many questions, particularly in regard to relations with
competitors, with employees, and the general public. But the policies
advocated from the very beginning by the chairman eventually were
accepted in full by all concerned, and they have for many years ruled the
Corporation’s actions.

Ingot on Way to Rolling Mill

Broadly speaking, the Corporation’s policies might be divided under
five heads—relations with competitors, prices, publicity, relations with
employees and, finally, with stockholders.
No better proof can be offered of the wisdom and success of the big
company’s methods of treating its competitors than the fact that, in its hour
of trial, when the Government of the United States was seeking to
disintegrate it, its competitors, the men who met and fought it for industrial
success, came forward practically in a body to its defense and testified that
its dealings with them and with the public had always been fair and
honorable.
The era that preceded the birth of the Corporation was one of
unrestrained, bitter, and often unfair, competition in the steel trade. Too
many manufacturers then worked, to paraphrase a well-known piece of
advice, on the principle of: “Sell steel, honestly if you can, but sell steel.”
But the management of the big company had the foresight to realize
that a new day was dawning and, to help to make the morning of that day

brighter, it adopted the policy of candid treatment of competitors, the
principle of coöperation. Possibly its motives were not entirely altruistic.
The Corporation itself benefited, as appeared later, from its course of
action. However this may be, it sought to make friends rather than enemies
of its competitors.
In this it had no easy task, for the trade had too long been used to fear
gift-bringing Greeks, to view with suspicion every unhostile act of a
competitor, to believe that business could possibly be done on the higher
plane adopted by the new consolidation. “Live and let live” was then
unknown in business, or, at least, in the steel trade. But gradually the fears
alluded to were overcome and the steel trade changed, or its methods did.
The Steel Corporation was an evolution, the natural result of the
integration in the industry that had been going on for many years. In it were
concentrated into a single organization all the processes of steel making
from ore mining to the manufacture of the most highly finished products of
all kinds, including transportation. And the evolution was not merely a
physical one. The new company stood for development along the lines of
modern thought of business methods and practices.
It was a fortunate thing that the Corporation from its organization had
as its chief executive officer a man far-sighted enough to see that so vast an
enterprise must avoid unfair practices and methods that, even if fair legally,
were hardly so morally, if it would live itself; a man with sufficient acumen
to realize that the Corporation’s very strength contained the germ of
weakness, and to guide it clear of the dangers to which it might otherwise
easily have fallen prey.
In formulating its policies governing competition the Corporation had a
difficult course to steer. The laws governing the actions of big business in
the United States were by no means clear and for that matter, are not so to-
day. On one side was Scylla and on the other Charybdis. To obey the law,
the Corporation was bound to engage in active and sustained competition
with other steel makers; at the same time, it had equally to refrain from any
act which might be interpreted as an attempt to take advantage of its great
size and resources and to overdo this competition.
In endeavoring to avoid the legal rocks, the Corporation, perhaps
naturally, did not meet with the most complete success. Indeed, to do so

would have been impossible, as there is no true middle course between
competition and coöperation—the best that can be hoped for is a
compromise.
It is interesting to note that the Government, in attacking the great
company, charged it with doing both the apparently forbidden things,
drawing from the Supreme Court the suggestion that these charges were
paradoxical and presented contradictions. Said the Court: “In one,
competitors (the independents) are represented as oppressed by the superior
power of the Corporation; in the other, they are represented as ascending to
opulence by imitating that power’s prices, which they could not do if at
disadvantage from the other conditions of competition.” And the Court
naturally asks, respecting competition: “Are the activities to be encouraged
when militant and suppressed or regulated when triumphant, because of the
dominance attained?”
This same idea was suggested by Judge Gary in his testimony before
the Stanley Committee, where he said:

It has seemed to me that the Sherman Law, so-called, has two
different provisions that, in their application, are more or less
antagonistic one to the other. One provision is against monopoly and
the other is against restraint of trade. If one manufacturer should
undertake to enter into any combination or agreement, expressed or
implied, to fix prices, to restrict output, to divide territory, it would
be considered an arrangement in restraint of trade and inimical to
that provision. On the other hand, except for some basis whereby
destructive competition could be avoided, whereby the old methods
of doing business under which, as you probably know, a few only of
the steel companies were allowed to survive and do business, and a
large majority were wrecked; if we should enter into that kind of
competition, it would mean that a large percentage at least of the
manufacturers of steel would be wrecked; and that would secure to
the survivors, to a greater or less extent, a monopoly; and our effort
was to find a position between those two extremes and what we
have done has been open and aboveboard, whether right or wrong.
We have met and laid our business on the table, so to speak, telling
one another frankly and freely just what we were doing, and while

that has not maintained prices, that has not prevented a good deal of
cutting by different ones at different places and times; while it has
not controlled the business in any sense of the word, yet it has had a
very steadying influence, and has prevented the destructive
competition to which I have adverted. That is the frank and honest
statement of facts, whether they are justified or not.

In its answer to the Government’s charges, the Corporation claimed
that, far from restraining competition, it had fostered it, and the majority of
its competitors themselves swore to the truth of this defense. The United
States District Court, before which the suit was first tried, pointed, in
summing up, to facts and figures of the growth of competitors which fully
and completely substantiated the Corporation’s claims. These figures
showed that the Corporation’s business from 1901 to 1911, in which year
the suit was brought, had increased over 40 per cent., but that in the same
time the Bethlehem Steel Co. had shown a gain of 3,780 per cent. in
business, the La Belle Iron Works of 463 per cent., Jones & Laughlin Steel
Co. of 206 per cent., the Cambria Steel Co. of 155 per cent., the Colorado
Fuel & Iron Co. of 153 per cent., the Republic Iron & Steel Co. of 91 per
cent., and the Lackawanna Steel Co. of 63 per cent., to say nothing of the
rise and expansion of entirely new companies, such as the Youngstown
Sheet & Tube Co., during the same period.
For many years, ever since the period of consolidation in
manufacturing and other industries began, big business had been viewed
with suspicion and something of hatred by the mass of the people—and by
no means without cause, in many instances. There was no question that the
powers that controlled more than one great industry used their resources to
crush competition and, too often, their money and influence for political
ends. No argument is necessary to convince the unprejudiced mind that
such acts were inimical to the good of the nation. It was perhaps natural that
the stigma that attached to some as a result of this was used by demagogues
and others, often sincerely enough, against big business in general as an aid
to themselves politically. In short, “Smash the trusts” was for years the
great vote-getting slogan, and unfortunately, is so still to some extent.
Small wonder then that the Steel Corporation, the largest and most
powerful of all the so-called “trusts,” was a shining mark for these attacks.

Small wonder that the man in the street, looking to his leaders for guidance
in such matters, was easily persuaded that the giant company was
necessarily a menace to the body politic.
Apparently this it was that Judge Gary foresaw when he insisted that
the organization at whose helm he stood must so conduct itself in all its
dealings with competitors and the public that it could at any time show
clean hands; could prove that its power had been used not destructively but
constructively for the good of all affected by its actions—and this means the
entire population of the United States. He has said publicly either in a
public address or when testifying that these policies were justified on two
grounds either of which is sufficient, namely: first, because they are right,
and secondly, because they will pay in the end.
He evidently saw that the very life of the Corporation depended upon
this; and time has proved the accuracy of his judgment. It is safe to say that
had the Corporation misused its power it would have been picked out many
years before it was for legal attack, and the attack would have been
successful. The Corporation would not have been in existence to-day.
To the lay mind, it is passing strange that the so-called “Gary dinners,”
which provided the principal example of the Corporation’s attitude toward
its competitors and the public, should have been made the subject for
special attack by the Stanley Committee and the Government’s attorneys,
and should have been criticized by the Lower Court. However, the Court’s
criticism appears to have been based largely upon a technicality, as the
judges in their opinion practically admitted that there was no intent shown
on the part of Judge Gary or his associates to restrain trade by these
functions. In fact, the criticism seems rather to have been based on certain
meetings held in Pittsburgh as a result of these dinners, but at which
meetings the head of the Corporation was not present.
Judge Woolley, who rendered a separate opinion, said of these dinners:

The first Gary dinner was given on November 20, 1907, to meet
an unquestioned exigency arising out of the panic then existing....
The dinner was given in order to devise ways and means to prevent
calamity to the [steel] industry. Ways and means were found which,
no doubt, contributed greatly in preventing disaster not alone for the

producers of steel but also to those intermediate consumers who
were carrying large and costly supplies. The ways and means
consisted then of nothing more than the urgent request of a strong
man that in the stress of panic all should keep their heads, and avoid
the consequence of reckless cutting of prices. In this the others
acquiesced, and in the light of the emergency then existing and of
the disaster averted, I am of opinion that the purpose and conduct of
those who participated in the first Gary dinner were not unlawful,
improper, or questionable.

In view of the notoriety that these functions had received and of the use
that had been made of them against the Corporation, it may be worth while
to devote a little time to them here.
The Gary dinners! Feasts that will rank in the business history of the
United States as did the feasts of Lucullus in epicureanism or Cleopatra’s
dinners to Antony in romance. Occasions where the heads of the steel
companies of the United States gathered at the festive board with amity and
good will, to consider and discuss a situation that threatened not themselves
alone, but the country at large; where these Titans of industry, only a few
years before mortal enemies, met as friends and openly and without fear
discussed with one another the intimate details of their businesses.
It was right after the first great shock of the panic of 1907. The country
was still trembling from the effects of the great financial disaster, and no
man knew surely whether the worst had been passed, whether financial and
industrial chaos had been staved off, or not. The storm clouds had not
passed away, and the men engaged in the steel and iron business, truly
called the barometer of trade, having on more than one previous occasion—
many of them, at least—seen a similar situation lead to years of distress and
of prolonged industrial depression and unemployment, in a word to what
the trade knew as soup-house days, had especial reason to be fearful of
what the immediate future held for them and the concerns with which they
were associated.
Nor were these panic fears confined to the steel giants alone. In fact,
the smaller manufacturers, the jobbers and the retailers, having generally
smaller resources, were in much worse case. Most of these latter were piled
up with heavy stocks of steel which they had purchased during the boom in

the earlier part of the year, and a sudden drop in steel prices would have
meant not alone the wiping out of all hope of profit, but certain bankruptcy
for a large percentage of them.
To the head of the biggest of the steel producers, then, all eyes were
turned. Judge Gary was deluged with letters from all quarters asking him to
use all his power and influence to help weather the financial tempest.
Naturally, it was very much to the interest of the Steel Corporation, as well
as of other steel manufacturers, to do all that was possible to prevent the
failure of the steel middlemen. Not only would bankruptcies have meant the
drastic cutting down of accounts due, perhaps their total loss in some cases,
but each failure would have meant the loss of a customer. These things the
steel men knew from past experience.
One thing above all others seemed to be needed, the great essential in
panic of every kind—that those concerned should keep their heads, should
remain cool and face the danger steadily, and with the strength of unity. A
leader was needed, and a strong one, and Judge Gary, head of the Steel
Corporation, was looked upon to assume the post, which he did. To Judge
Gary it seemed that the first and essential step was to bring the steel
producers together and to explain the situation to them, pointing out that the
only hope of salvation was in coolness and unity.
So he wrote a letter to practically all the large steel producers inviting
them to a dinner at the Waldorf-Astoria, in New York, on November 20,
1907. The response was unanimous, and on the evening of that day there
gathered around the table in the ballroom of that hotel the representatives of
concerns producing more than 90 per cent. of all steel made in America, as
well as the representatives of some Canadian companies.
At the proper time the host explained the object of the meeting. What
he said can best be related in his own words:

I stated the purpose and object of the meeting were if possible
to prevent the demoralization of business. I stated that the first
object of the meeting was to secure a better acquaintance with each
other, and come into close contact in order to know one another,
hoping that we might deal with and toward one another as
gentlemen and not as enemies. That the purpose was, if possible, to

prevent demoralization of business, to secure as far as practicable
stability of business conditions, as opposed to wide and sudden
fluctuations; to prevent, if possible, failures on the part of our
customers and to comply with their wishes in every respect; to
prevent, if we could, a long continuance of the panic, which meant
failures to a great many people and manufacturers themselves,
because of their debts at the banks or because of their commitments
for extensions, and to customers because of the large stocks they
had on hand, the sudden change in the prices of which might be
very damaging; and so far as we properly could, to maintain, or to
assist in maintaining, business conditions generally, the opposite of
which should be deplored.

* * * * *
I stated distinctly ... at that time that, as they all understood, we
could not make any agreement, expressed or implied, directly or
indirectly, which bound us to maintain prices or restrict territory or
output; it must leave us free to do as we pleased, and must rely upon
a disposition of all others to do what they considered fair and right,
and for the best interests, not only of themselves, but all others who
had any interest in that or any other work. I made that perfectly
plain.

Judge Gary’s remarks made a profound impression, and his hearers
unanimously agreed to adopt the means he suggested for obviating the
worst of the panic dangers. Resolutions creating a general and several sub-
committees were made and passed and the meeting adjourned, subject to
call.
Following this dinner similar sessions were held in January, April, May,
and December of 1908. The December feast was the last of the Gary
dinners proper, although some meetings were held subsequent to that time.
Were prices fixed at the Gary dinners? Let us settle this point as it was
one of the chief things charged against the Corporation in the Government
suit, and is the question on which the ethical morality of the holding of
these dinners rests.

At the first of the Gary dinners the host explained that the fixing of
prices was forbidden by the laws concerning restraint of trade, and that
nothing could or should be done which would not conform in all ways to
the law. Yet it is plain that the effect of these dinners was to stabilize prices
for steel. It does not appear that there was any definite agreement between
the different interests represented as to what quotation they should ask for
their products, but it is obvious that the mere statement, between gentlemen,
that one intended to adopt a certain course in regard to prices tended to
influence his colleagues to follow a similar course. It must be suggested,
nevertheless, that there was never any question of restraint, as all were free
to act as they saw fit, and it seems that on some occasions there was not
even absolute agreement. At the worst the participants at the Gary dinners
stretched the interpretation of the law a little to do a great right—the
financial salvation of the steel industry, which, remember, was, and still is,
the leading industry of the country.
What was the result of the Gary dinners? Simply that, whereas in
previous panics gravestones of steel producer and middlemen had been
numerous, not one important failure in the trade was recorded as a result of
the 1907 panic. There is no question that this was due to the leadership of
the head of the Steel Corporation.
Early in 1909—on February 18th—another meeting of the steel leaders
was held, this time taking the shape of a luncheon. This occasion, in a
sense, was the formal breaking up of the Gary dinner programme, as it was
then that Judge Gary, satisfied that several of his competitors had departed
from their intention to maintain for themselves respectively stability of
business and prices, announced that the Steel Corporation would in future
“go it alone.” That it would get what business it could and would not
divulge its affairs to competitors. This was followed by the so-called open
market in steel which sent prices down to a very low level.
And here might be inserted an interesting fact. Orders were sent out to
the various sales managers of the different Corporation subsidiaries that
they were to go after business and get all they could, orders particularly
welcome to those who had longed for the flesh pots of Egypt, the old
Carnegie methods, and who believed that the big company could force its
competitors to the wall by such a course. A vigorous campaign for orders
followed, both on the part of the Corporation subsidiaries and the

independent companies, but the result went largely to prove that the big
company did not have the power which its enemies claimed it had, of
crushing competition. In the words of Colonel H. P. Bope, vice-president
and sales manager of the Carnegie Steel Co., and a graduate of the Carnegie
steel school, the result of the 1909 sales campaign was a disappointment to
him, the Corporation failed to cut into its competitors’ business, losing a
little to them in some lines as a matter of fact.
There was yet another dinner to come. On October 15, 1909, the steel
makers of the United States and Canada joined together to honor the man
who had first called them together during the stirring and dangerous panic
times two years previous. The leader of the movement was Charles M.
Schwab, and many of the most prominent men in the trade made speeches
in honor of the guest of the evening. It was, as Mr. Schwab said, “the first
time when the heads of all the big concerns in the United States and Canada
had gathered to do honor to a man who has introduced a new and successful
principle in our great industry.”
T. J. Drummond, vice-president of the Algomah Steel Corporation, in
his address defined this principle as the doctrine that “what is good for my
competitors is good for me.”
Referring to the Judge Gary leadership in the trying times the trade had
passed through Mr. Drummond said: “Always the voice of our leader rang
strong and clear, ‘Steady, boys, and play the game.’ And by the Lord, you
played, and played it fair.”
A beautiful cup of gold was presented to the Judge by his steel
colleagues at this, the very last of the Gary dinners.
The question of price restraint, or the Corporation’s influence in
maintaining or depressing the price of steel, is suggested naturally by that of
price fixing at the Gary dinners. This question is one seriously affecting the
Corporation’s existence, being interwoven closely in that of the treatment of
competitors. Getting down to basic facts the principal objection of the man
in the street to trusts or monopolies is that the securing of unchallengeable
power by one concern in any industry is likely to lead to higher prices or
lower quality, either of which would swell the profits of the monopolistic
corporation and would harm the public. It is therefore important to consider
the Corporation’s general policy in the matter of prices.

During the Steel dissolution suit a number of competitors and of steel
consumers testified that the big company had always endeavored to
“steady” prices, a fact evidenced by the very holding of the celebrated
dinners. That it had always been the last to advance, and was equally loath
to reduce. They agreed, however, that the steadying influence was brought
to bear, not to keep prices at levels where enormous profits could be reaped,
but rather at such quotations as gave the manufacturer only a fair and
equable profit on his investment, evidenced by the fact that the Corporation,
unlike many of its competitors, fixed an approximate high-water mark for
prices in boom times, and made no attempt, in fact refused to sell above
these, although they were much lower, to use a phrase made familiar in the
old days of railroading “than the traffic could bear.” These witnesses also
asserted that the tendency of prices since the birth of the Steel Corporation
had been downward and finally that the quality of the product, and these
were men qualified to know whereof they spoke, had been appreciably
bettered.
In its decision the U. S. District Court pronounced itself as satisfied that
the Corporation did not have the power, even if it wanted to, to force prices
to an abnormal level. The Court found it proven that steel prices could not
be advanced arbitrarily above the level quoted by any important competitor
in the field, and that the so-called independent companies were themselves
too large and too powerful to be forced to the wall by the methods that have
been employed by some “trusts” to secure monopoly.
Regarding the question of the course or tendency of prices the
testimony of Professor Jeremiah Jenks is particularly illuminating.
Professor Jenks, whose reputation as an economist is world-wide, verified
and explained charts previously put in evidence showing that the
purchasing power of steel, the real price obtained by what is known as the
index system, recognized by economists as the best test of price
fluctuations, had decreased decidedly between the date of the organization
of the Corporation and the time of the steel suit, as compared with a similar
period before the birth of the Corporation. The same table showed that apart
from the economic test and merely on the basis of actual prices received the
average prices of steel and iron in the same period had declined slightly
between the same periods.

From all of this evidence the observer must conclude that the policy of
the Steel Corporation has not been to inflate prices or to depreciate quality,
and that it has been its endeavor to give the consumer the best steel possible
for the smallest amount of money compatible with decent profits.
Incidentally, the lower prices of steel shown by Professor Jenks’s charts
were made in the face of advancing wages amounting altogether to more
than 27 per cent. And labor forms the most important item of expense in
steel making. The chart on opposite page 230, a copy of one of those
testified to by Professor Jenks, is illuminating and needs no explanation.

Relative Price and Purchasing Power
of Iron and Steel in the United States.
Ten Commodities (Iron & Steel)
General Commodities
Purchasing Power

Conditions in the steel trade at the time this is written, October, 1920,
provide a striking commentary on the Corporation’s attitude respecting
prices. But to understand them one must go back about eighteen months.
In March, 1919, the President of the United States, desiring to bring
about a deflation of the high prices for all commodities that had prevailed
during the war, created an Industrial Board to take charge of the matter and
urged manufacturers in all industries to coöperate. Because of the immense
importance of steel in the country’s economic life the steel trade was
selected to set the example of deflation, and it responded loyally. As a
result, on March 20th of that year, a scale of prices was agreed on at a level
which it was calculated would give the lower-cost producers a reasonable
profit, and those prices were immediately put into effect generally.
Shortly afterward the Government itself, through one of its agencies,
the Railroad Administration, refused to abide by this agreement. The
immediate effect was injurious to the industry, but shortly afterward the
demand for steel became so strong that prices, beginning in the late fall of
the year, advanced rapidly till they were, in some cases, $50.00 a ton or
more above the quotations agreed on between the manufacturers and the
Industrial Board.
But the Corporation, holding that public policy demanded that living
costs and all factors entering into living costs should be held down as low
as possible, continued and still continues to sell steel at the prices fixed the
previous March. This, notwithstanding the fact that it has since advanced
wages and that its costs have been materially increased by the advance in
railroad rates on its raw materials, put into effect on August 26, 1920.
The Corporation could easily have obtained the same prices as did its
competitors and would have reaped enormous profits as a result, but it
contented itself with a reasonable return and the consumer and the public at
large have benefited from its course.
Important among the policies of the Corporation, in its dealings with
the public, has always been publicity. The organization of the big company
was marked by open dealing, all details of the proposed merger being
published widespread before the deal was carried through. And ever since
the Corporation began its existence the policy of keeping the public and its
stockholders informed as to its actions and business has been adhered to.

The results of the Gary dinners were promptly given to the public press; and
there is testimony in the record in the Government case that the Department
of Justice of Washington was always kept fully informed. Moreover, no
complaint was ever made by any one of the “Gary dinners” until the Stanley
Committee intimated an illegality, after which it has never been claimed
there was any such dinner or meeting.
Almost since the date of incorporation it has been the custom to issue
quarterly a report of earnings showing the results of the operations of the
three months covered. These reports are issued on the last Tuesday of the
month following the quarter covered in the report. On the tenth of each
month a statement of the unfilled tonnage on the Corporation’s books is
issued from the head office, and in other ways the stockholders are kept
informed as to what is going on in their company.

Rails on Cooling Bed

Annual meetings of the Steel stockholders form a decided contrast to
those of many other companies. One is accustomed to look upon the annual

meetings of corporations as mere formalities attended by a few officials
with perhaps a lone stockholder not holding office; and reticence in
discussing the company’s business or policies is the general thing. But the
Steel meetings are always well attended, and stockholders are encouraged
to discuss fully the affairs of their company, and to criticize to their heart’s
content. Chairman Gary is ready and willing to explain at length on any
issue raised, and the whole effect of these meetings is one of openness, of
candor.

Pouring Ingots

How ready the management of the big company is to meet criticism
half-way is illustrated by the events at the annual meeting in 1911 when a
stockholder moved that a committee be appointed to investigate the
condition of the steel workers in the Corporation’s mills and to report
thereon, suggesting such remedies for evils they might find as seemed wise.
The mover particularly criticized the twelve-hour day and the seven-day-a-

week schedule of labor. It was questionable whether the mass of
stockholders present, having absolute confidence in the desire of Judge
Gary to give at all times the fairest possible treatment to the worker, would
have carried such a motion, but Judge Gary himself, holding proxies for the
majority of the stock, voted all this stock in favor of an investigation, and a
committee was appointed. Thus did the management of the Corporation
give proof of its readiness to face investigation and to answer fully and
satisfactorily any honest criticism, just or unjust.
The attitude of the Corporation’s management in the matter of
publicity, it seems to the writer, is simply that the company’s vast size and
the number of its stockholders, as well as the army of men it employs and
its influence upon industrial conditions generally, render it in a sense a
public institution, one in which there is an enormous amount of warranted
public interest, and that this interest should be satisfied. That so great a
company must work in the open, all its actions being able to bear the full
glare of daylight.
Up to the time of the Corporation’s organization publicity on the part of
big industrial enterprises was almost unknown. Certainly steel makers did
not show any desire to take the public, or even the small stockholder, into
their confidence in regard to details of their business. The immense profits
made by the Carnegie company were not revealed until the Carnegie-Frick
quarrel caused their revelation. But all this has been changed and the
necessity for full reports to stockholders and to the public at large is
recognized by the corporations themselves. Steel companies, in particular,
give detailed information of their earnings, operations, etc., at least once a
year, and in some cases every quarter. And this is doubtless due to the
example of the Corporation.
Sooner or later all big business must fall into line in the matter of
publicity. For the leaders of business thought are coming to recognize that
secrecy breeds suspicion and enmity, while openness makes friends. And
they will all follow—as many have already done—the example of the Steel
Corporation of doing business in the full glare of daylight.
In the chapter on Welfare Work and in that on the Steel Strike two
aspects of the Corporation’s policies regarding its relations with employees
are discussed at considerable length. Broadly speaking, the Corporation’s

attitude is that every worker is entitled to as large a wage as conditions in
the industry and justice to investors warrant, decent living conditions, and
the right to work when, where, and for whom he pleases. By encouraging
the worker to invest in its stock it seeks to make sure his full coöperation in
its activities and to bring home to him the realization that the interests of
labor and capital are identical.
Finally, we come to the Corporation’s relations with stockholders, its
financial policy. For twenty years the big company has been steadily
building up its assets with a view to making its common stock the safest
investment of its kind in the world. It is not too much to say that it has now
attained that eminence, and if its stockholders in the past have not always
shared in profits as liberally as they may have considered their due, there is
no question that their loss in the past has been much more than made up for
by the security which the future promises.

CHAPTER XIII

STEEL FROM THE INVESTOR’S VIEWPOINT

A
lthough throughout the chapters of this history stress has been
constantly laid upon the activities of the United States Steel
Corporation in promoting better relations between capital and
labor, in improving the working conditions of its employees, in introducing
new and more honorable methods into competition, and in blazing the
pathway for corporate publicity, it must be recollected that the Corporation
has been a business enterprise first and last.

In the final analysis it was and is a money-making institution. The
paying of dividends to stockholders was the basic reason for its existence.
United States Steel, both in capitalization and output, was the largest
business in the world. But its management was not satisfied with this. It has
always been the ambition of Judge Gary and his associates to make its stock
the premier industrial security in the United States and, for that matter, in
any country.
Final decision as to the measure of their success rests with the investor;
and he has decided and made his decision evident. To-day United States
Steel common stock sells in the market at an investment yield lower than
most, if not all, other industrial and railroad securities, a yield, in fact, that
compares not unfavorably with that on securities of the Government of the
United States itself.
Nor is the reason far to seek. As the Corporation has earned and enjoys
the confidence of its competitors, customers, and most of its workers, so it
has earned the confidence of the great mass of the investing public which

regards it, not without justification, as the principal bulwark of the country’s
business.
The investor knows that the big company has great earning power and
enormous assets behind every dollar of its securities. He knows, moreover,
that its activities have always been open to the light of day. They have
undergone the most rigid scrutiny by various public investigating bodies
and by the U. S. Department of Justice. And every revelation made has but
served to convince the public more and more of the ability of the
Corporation’s management, its financial strength, and the justice of its
policies.
In an earlier chapter it was suggested that United States Steel common
stock at the time of organization in 1901 had no actual investment behind it,
that in a sense it represented pure water or “blue sky.” An enormous amount
in securities had been paid for good will, the value of which was, at best, a
matter of personal opinion. The Corporation’s earning power, despite the
sanguine hopes of its organizers, was uncertain or, at least, not proven.
And these facts were fully realized by Judge Gary and his colleagues.
While probably believing that full value in earning power had been received
for the hundreds of millions paid for good will, they were not satisfied to let
matters remain in that state, and bent their energies, at the sacrifice of
immediate dividends to stockholders, toward squeezing out every possible
drop of water behind the stock, and putting at least one hundred cents of
tangible assets behind every dollar of securities of any kind in the hands of
the public.
In this they have more than succeeded. The bonds and preferred stock
of the Steel Corporation are to-day recognized as being absolutely gilt-
edged, and even the most captious critics do not attempt to deny that every
share of common stock is backed up by assets far exceeding its face value.
Reference has already been made to Judge Gary’s statement, in
October, 1919, before the Senate Committee on Education and Labor, then
investigating the steel strike, that the Corporation’s properties were worth at
least $2,200,000,000. Competent steel men, outside the Corporation,
express the opinion that this valuation was ultra conservative. They point to
the fact that the Judge’s valuation was obviously based upon expenditures
of approximately $900,000,000 for new plants between 1901 and 1919, and

assert that it will never be possible to replace these plants for less than
$1,250,000,000. But accepting Judge Gary’s valuation as accurate, Steel
common has between $260 and $270 in assets behind it.
Just as the investment behind the stock has been increased and
accumulated, so has earning power been strengthened. So great is the
Corporation’s capacity to-day and so strong is it financially that it is almost
inconceivable that it will at any time in the future be unable to maintain its
present dividend rate of $5.00 a share annually on the junior stock.
From the date of its incorporation in 1901, to December, 1919, the big
company expended for new construction, increasing its capacity and
modernizing its plants, $888,301,355, or the equivalent of $159 on every
share of its common stock, and $19,717,755 more than its entire stock
capitalization, common and preferred. Nor did this include approximately
$108,000,000 spent for plants for producing war materials and written off
as operating expenses.
Construction expenditures in 1920 were, approximately, $102,000,000,
making a total on this account since incorporation of a billion dollars in
round figures.
Appropriations for depreciation, sinking funds, and repairs to plants
have been enormous, aggregating in nineteen years $1,424,415,590, or
almost as great a sum as that at which the property account is now carried,
$1,573,661,547.
The Corporation has expended, for ordinary repairs alone,
$835,900,568, or about the actual investment value of the properties
acquired at incorporation.
As a result of these enormous expenditures, it has:
Increased its pig-iron manufacturing capacity from 7,440,000 tons in
April, 1901, to 18,400,000 tons in December, 1919, a gain of 147 per cent.;
Increased its steel ingot capacity in the same time from 9,425,000 tons
to 22,350,000 tons, or 137 per cent.;
Increased its finished steel capacity from 7,719,000 tons to 16,200,000
tons, or 110 per cent.;

Increased its cement capacity from 500,000 to 13,500,000 barrels, or
2,600 per cent.;
Created from zero a by-product coke capacity of about 45,000,000
gallons of benzol, toluol, and other light oils, as well as built up enormous
capacity for other coke by-products including ammonia sulphate, tar,
fertilizers, etc.;
Increased the railroad mileage it owns and operates from 2,007 to 3,775
miles or 88 per cent.; the number of cars owned from 27,481 to 62,258, and
of locomotives from 593 to 1,445.
Increased the number of steamers, barges, and other marine units
owned from 112 to 371.
Increased its working capital from $138,110,545 to $569,988,259, or
313 per cent.;
Its iron-ore holdings, estimated at 700,000,000 tons in 1901, are now
placed at 1,600,000,000 tons.
A better grasp of the Corporation’s expansion between 1901 and the
beginning of 1920 is obtained by comparing capacity at the date of
incorporation with what has been added since:

1901 ADDED SINCE
Pig iron 7,440,000 tons 10,960,000 tons
Steel ingots 9,425,000 ” 12,925,000 ”
Finished ” ”
steel 7,719,000 8,481,000
Cement 500,000 bbls. 13,000,000 bbls.
Benzol ————— 45,000,000 gals.
Railroad miles miles
mileage
owned 2,007 1,768
Railroad
cars
owned 27,481 34,767
Locomotives
owned 593 852

Steamers,
etc. 112 259
Iron ore tons tons
deposits 700,000,000 900,000,000
Working
capital $138,110,545 $431,877,714

As these figures show, additions since 1901 would constitute a new
company larger in practically every respect than was the Steel Corporation
at its birth. And this expansion has been achieved with little addition to the
book value of the properties, which at the end of 1901 was carried at
$1,437,494,863 and in 1919 at $1,573,661,547.
And, of course, there have been further additions during 1920.
Complete figures for that year are not available at the time of writing but
property account as of December 31st, is estimated at $1,620,140,000 and
working capital at $595,952,000.
Nor has this expansion been accompanied by the addition of a single
penny to stock capitalization. In fact, the amount of preferred stock has
been reduced, as has the annual charge on earnings for bond interest and
preferred stock dividends.
When formed the Steel Corporation had a total bonded debt, including
funded indebtedness of subsidiaries, of $364,735,900, and its bond-interest
charges were at the rate of $23,964,175. Its preferred stock was
$510,281,100 with an annual dividend charge of $35,719,677, or a total of
$59,683,852, which had to be deducted from earnings before there could be
any distribution made on the junior security issue. At the end of 1919 total
bonds of the Corporation itself and its subsidiaries amounted to
$568,727,932. Interest charges thereon were $29,210,898. But preferred
stock has been reduced to $360,281,100 and the dividend requirements
thereon to $25,219,677, making total deductions from earnings before
arriving at the balance available for distribution to common stockholders of
$54,430,575, or $5,253,277 less than in 1901. This saving in interest on
preferred dividend charges is equal to a little over a dollar a share on the
common stock, which has remained at the same figure throughout the
twenty years of the Corporation’s existence.

In discussing the investment value of Steel common, it is necessary to
lay considerable emphasis on the actual tangible assets, at cost, behind the
stock. Tangible investment is of particular importance because earning
power is based largely on it, and on earning power depend dividends.
Although Judge Gary’s estimate of the worth of the Corporation’s
properties is considered by experts very conservative, the writer proposes to
disregard it for a moment and to discuss the value behind U. S. Steel stock
on the most conservative basis—that of tangible assets in 1901 plus tangible
additions since. Even on this basis, which is certainly a bed-rock
computation, it will be seen that the assets behind “Little Steel” are
considerably larger than its par value.
Eliminating from the balance sheet $508,302,500 common stock under
the plea that it represents nothing but good will, we still have $741,019,795
surplus accumulated in nineteen years, or sufficient to restore with tangible
value the common stock item wiped out and still leave a surplus of about
$233,000,000. Or, deducting from present book capital and liabilities, plus
surplus and reserves which may fairly be regarded as surplus, the common
stock item, leaves a balance, representing tangible investment of
$1,670,028,825.
On this basis the assets behind the common stock are not far from $150
a share.
There is still another way of calculating values, and here again let us
eliminate the original common stock for reasons already given and place the
value of the investment in the Corporation in 1901 at $815,000,000 in
round figures, or approximately the aggregate of the bond- and preferred-
stock issue. The ingot capacity based on this investment was 9,425,000
tons. The ingot capacity on December 31, 1919, was 22,350,000 tons.
Presuming that investment has increased proportionately with its capacity,
the value behind the Corporation’s securities is now $1,930,000,000 and
this makes no allowance for values represented by coke by-product plants,
cement plants, increased ore reserves, shipyards, etc. Ingots alone are taken
as the base of the calculation since this product is generally regarded as the
measure of a steel company’s capacity.
In studying the Corporation’s annual reports, the analytical investor
will find certain indications that appear discouraging at first glance. They

must be examined in the light of other facts and particularly in the light of
comparative tangible investments.
Reference is here made to the increasing tendency shown in the
operating ratio of the big company. Normally, an increasing operating ratio,
a tendency toward diminution of the margin between operating expenses
and gross receipts, is not a healthy sign in any business, and the Corporation
undoubtedly shows just such a diminution.
But in the case of United States Steel this usually unfavorable factor is
really a tower of strength. It is, in fact, deliberate. It is part and parcel of the
Corporation’s policy of giving the wage earner as large a share as possible
in the proceeds of operations. And it has been possible to increase the
worker’s share of gross sales in recent years without injustice to
stockholders only because of the ploughing back of profits of previous
years into new plants, increasing the investment, and enlarging capacity.
Because of this policy, it has been possible for the Corporation to show
increasingly large earnings on its shares, although capital’s percentage in
gross receipts has declined. It is hardly necessary to say that there is no
intention of letting the decline go beyond just limits. Although the
Corporation’s management has always shown recognition of the rights of
the worker in this as in other ways it has never lost sight of the equally
important rights of the investor and the latter has no cause to fear that it will
ever do so.
In 1901 on a net investment of approximately $815,000,000 the
Corporation, to pay bond interest, preferred dividends and 5 per cent. on its
common stock, had to earn approximately $85,000,000. To-day, to pay the
$80,000,000 required for the same purposes, it has a net tangible investment
of between $1,700,000,000 and $2,000,000,000.
The following table illustrates how increased investment and capacity
permit the big company to show large earnings on its stock with a much
smaller return on its investment or capacity to-day than was possible in
1901.

1920 1901
Actual investment $1,800,000,000 $815,000,000

Interest and dividends
at 5 per cent. on
common stock. 80,000,000 85,000,000
Per cent. on
investment. 4.4 10.5
Per ton earnings
needed on iron
capacity to earn
interest and
dividends $4.34 $11.42
Per ton earnings
needed on ingot
capacity to earn
interest and
dividends 3.58 9.02
Per ton earnings
needed on finished
steel capacity to
earn interest and
dividends 4.94 11.01

Thus it is both good business and good policy for the Corporation to
give the wage earner a larger share in gross receipts, and its enormous
investment and great capacity enable it to do this without prejudicing
interests of stockholders.
Further, the very fact that so small a margin of net profit is needed,
whether calculated on investment or capacity, to pay dividends, is of itself
satisfactory assurance of the safety of the dividend rate.
A great steel maker said, some years ago, that the demand for steel, the
most important metal of the present age, doubles every twenty years.
Experience educates that the actual rate of the growth of demand for the
metal is even faster. The needs of the world for steel, as they expand, can
only be met by the putting of new capital into the production of more steel,
and this capital, to be attracted, must be allowed an earning power of at
least 6 per cent. The Corporation, as shown, needs to earn less than 4½ per
cent. on its investment to continue the present dividend rate on its common

stock. Obviously it has nothing to fear from possible future competition. It
can hold its own and be generous to stockholders in the face of any
competition that can occur.
Another factor of the highest importance in considering United States
Steel stock as an investment is that of production costs. Here again the
Corporation is in an enviable position. That its production costs are lower
than those of most, probably all other manufacturers, is not challenged even
by competitors themselves. It is indisputable. Presuming the possibility of a
bitter trade war, the Corporation would unquestionably emerge the victor.
But a trade war seems out of the question. The Corporation could not, for
politic reasons, initiate it, and its competitors could not afford to. It stands
in the position of a strong man armed, keeping his house, and, it may be
added, its stockholders may be at peace.
The immense spread of the Corporation’s activities, the wide
diversification of its products, the enormous area over which its plants are
scattered, all these are further elements of strength. A company making only
a limited line of goods is subject to adverse or favorable influences arising
out of the changing demands for these lines. But the law of averages
protects the company making a wide variety. A loss here is made up by a
gain there, and the general tendency is toward greater stability. Influences
that affect one section of the country unfavorably often do not extend to
other sections, and the Corporation operates in all sections.
In the foregoing discussion of the value of United States Steel stock as
an investment the factor of good will has been deliberately ignored,
eliminated. Nevertheless, good will is probably the Corporation’s most
valuable asset.
During twenty years its management, under the able leadership of
Judge Gary, has been steadily building up good will. It has endeavored to
gain the favorable opinion, not of its customers alone, but of its
competitors, its employees, and the public at large; and it has succeeded.
Its policy of a square deal to all is as old as the Corporation itself; the
events of the past year afford an illustration of one phase of this policy and
its effect on good will that has a direct bearing on the present discussion.

Throughout the year, during which a great advance in the price of steel
occurred, the big company steadfastly refused to depart from the prices it
had agreed on in March, 1919, with the Industrial Board appointed by the
President of the United States. The fact that the Government itself had
abrogated this agreement gave it ample warrant to do as other
manufacturers were doing and to sell steel at prices from $10 to $50 a ton
above those it charged. But in order to help deflate living costs to the public
and to assist in the readjustment of business, which its management saw
was inevitable, it rejected with open eyes the enormous profit it might have
made and contented itself with moderate earnings.
In addressing the stockholders of the Steel Corporation at the annual
meeting of April 19, 1920, the chairman said:

Inquiry has been made by some of our stockholders as to why,
in view of the great demand, the cost of production, and the prices
received by other manufacturers, we hold the selling prices of our
commodities down to those which were fixed by agreement between
the Industrial Board and steel manufacturers at Washington, March
21, 1919.
It seems to us the problem of high cost of living is of
convincing importance. When the increasing tendency is to insist
upon payment of unreasonable sums for every commodity and for
every service, so that the vicious whirl of advancement seems to be
unending, we think there is a moral obligation on the part of
everyone to use all reasonable efforts to check this carnival of greed
and imposition, even at some sacrifice.... It should be the effort of
all to establish and maintain a reasonable basis of prices; certainly to
prevent further advances.

By this policy it has built up in a single year good will of incalculable
value which will show on future earnings.
And even though good will may be eliminated in discussing the
investment value of steel, if for no other reason than that it is too immense
to permit of computation, the steel stockholder knows that it is behind his
investment all the time.

CHAPTER XIV

THE GREAT STEEL STRIKE

D
uring the World War, there began to gather on the industrial
horizon a cloud no bigger at first than a man’s hand, but one that
grew fast in size until it broke in a storm the effects of which
made themselves felt in every corner of the globe.

This was a general feeling of unrest and dissatisfaction, by no means
confined to one country or one class of people, but having its most virulent
manifestations among the laboring classes, the proletariat. This unrest was
fostered and seized upon by radical leaders everywhere to further their own
ambitions, their object being the overthrow of capital, the nationalization of
industry, and their own aggrandizement.
Nor were they without considerable success in some countries. Russia,
of course, provided the most notable example, and England to-day is
suffering by reason of the same forces; but the United States,
notwithstanding its aloofness from the centre of disturbance, its prosperity,
and the general high average of common sense among its inhabitants, did
not entirely escape.
Here the radical manifestations took the form of industrial strikes
which broke out sporadically in all quarters. It was natural that the steel
industry should not be immune. In fact, it was inevitable that steel, more
than any other industry, should be selected for especial attention by those
who hoped to do away with private ownership and to establish mob rule.
Among the reasons that may be cited for the selection of the steel
industry, and the United States Steel Corporation in particular, for a grand
attack by the radical forces were the following:

Steel was “open shop.” Since 1892, when the Carnegie Steel Co., in
one of the bloodiest and bitterest industrial conflicts in history, crushed the
Homestead strike, the labor leaders unions had never succeeded in
regaining a foothold in the trade, and it was looked upon as a lost province
by labor leaders who never abandoned the hope of some day organizing the
steel workers. This fact gave the radicals in the labor ranks confidence that
they could count upon the support of the usually conservative heads of
organized labor in America to further their plans if steel were chosen as a
battle-ground. And the events proved that their confidence was not
misplaced.
Further, the physical necessities of steel making are hard on the worker.
Although employers have done much to ameliorate conditions in the mills
and mines, it is impossible to make the work really pleasant and it was
therefore comparatively easy to give verisimilitude to distorted statements
regarding the hard lot of the steel worker.
Again, a large percentage of the common labor in the steel plants was
of alien birth, usually lacking in education and easily influenced by
inflammatory doctrines.
Labor leaders, doubtless, also believed that the long litigation which the
Government had conducted against the Steel Corporation had turned public
sentiment against the big company. If this was a factor in their calculations
they were sadly deceived.
So, briefly, we have the genesis of the steel strike—the determination
of organized labor to absorb steel workers and the seizing upon this by the
radicals as the tool to further their own anarchistic ends.
The strike, when it came, was inaugurated ostensibly to compel the
manufacturers to grant recognition to union “representatives” of the
workers. Steel company officials claimed that its real object was twofold—
to force upon the industry the “closed shop,” and to overthrow the social
scheme upon which the American Republic was grounded.
Labor leaders throughout the struggle consistently denied any intention
of forcing a closed shop. And it is true that they at no time demanded this in
so many words; but the closed shop would have resulted inevitably had they
won. One has only to examine their demands to realize this.

And the lust for power on the part of the leaders of organized labor was
used by the radicals as a tool with which they hoped to gain a much greater
goal than the closed shop—the nationalization of the steel industry and,
using that as a wedge, of all American industry.
In fighting and smashing the strike the Steel Corporation performed an
invaluable service, not alone to its stockholders or to capital, but to the vast
majority of workers who claimed the right to work at their own volition and
not the dictates of self-appointed leaders; a service to the American public
at large.
Says Mr. Charles Piez, one-time head of the Emergency Fleet
Corporation, in a recent article in The Independent:

The real or imaginary wrongs of the workers played not the
slightest part in the decision to organize the steel industry.
It was a citadel of the open shop that was the subject of attack,
it was the last barrier against complete and final unionization of
American industry, against which Foster and Fitzpatrick combined
their wits and resources.
And it is to the everlasting credit of Judge Gary that he
successfully resisted this attack, for it is to the interests of the public
that the principle of the open shop be sustained.

(Upper) Part of the Duquesne Works

(Lower) Detail of Unloading Ore—a Hulett Machine

How important to the labor unions was the hope for organization of the
Steel Corporation is obvious. Between 500,000 and 600,000 workers are
engaged in the industry, the Corporation alone employing about 275,000.
Possibly another half million are employed in closely allied industries. And
the steel trade, as well as these allied industries, has for years looked to the
Corporation for guidance on important questions of public polity. Hence,
United States Steel’s adherence to the open-shop principle was a deep and
rankling wound in the side of the labor unions.

Making Wire Rods—Old Method

So long as the big enterprise of which Judge Gary is head remained
outside of the union’s fold there was small hope of herding into it any
material number of workers in other plants. U. S. Steel was a citadel of the
open shop, the bulwark between free and union labor. If it could be
converted from “open” to “closed” shop, the early unionization, not of the
steel trade merely, but of all American industry, would follow, and the
power of the union leaders would be expanded to an almost illimitable
extent.
It is doubtful if the older and wiser among the union chieftains would
have forced the issue at the time they did had they been left to their own
decisions. But they were not. They had the radical element to reckon with.
It is perhaps unnecessary to explain that organized labor in the United
States is divided into two parts: On the one hand, there is the American
Federation of Labor, headed by Samuel Gompers, and including the great
majority of unionized workers. This organization recognizes property rights
and is loyal to the principles of American government. But its leaders, being

only human, are apparently determined to bring all industry under its sway
and are impatient of the ideas of those workers who prefer to stand on their
own feet.
On the other hand, there is a smaller organization, the Industrial
Workers of the World, better known as the I. W. W. or, sometimes, the “I
Won’t Works.” “The wobblies,” as they prefer to call themselves, are as
bitterly opposed to the principles of the larger Federation as they are to
capital. Chief among their tenets is the Marxian fallacy that labor produces
all and capital nothing and that, therefore, capital must be abolished.
Some years ago there arose to prominence in the councils of the
I. W. W. one William Z. Foster, a man of unquestioned ability but of
principles dangerous and subversive to government. These principles he set
forth in a book on “Syndicalism,” a book which constitutes one of the most
extreme examples of anarchistical literature. Foster characterizes the wage
system as “the most brazen and gigantic robbery ever perpetrated since the
world began.”
Although advocating the most drastic measures for the overthrow of
capital, Foster was apparently sufficiently astute to realize that a vast
majority of the American people, and even of organized labor, would not
and could not accept his views, and that the I. W. W. which did was not a
powerful enough weapon with which to achieve his ends.
He believed, however, and events proved that he was not mistaken, that
the American Federation of Labor could be inoculated with radicalism if the
poison were spread from the inside. He therefore publicly advocated what
he described as the process of “boring from within,” urging that the radicals
join the more conservative Federation and, once inside that body,
disseminate their vicious doctrines from within.
Not long after this we find Foster a member of the Federation,
ostensibly converted from his I. W. W. leanings, enjoying the confidence of
Gompers and his co-workers, and high in their councils. His “boring”
process had met with eminent success.
Meanwhile, the World War was approaching its end, leaving in its wake
a world-wide wave of industrial unrest. Russia was being misgoverned by
its most radical element, who held their power in the midst of a sea of

blood. Communistic doctrines were being preached, openly or sub rosa, in
every land and clime. American labor was restless, and the foreign element,
particularly, showed that it had been infected with the fever of anarchism
that was rampant in parts of Europe. The time had come for the radicals to
strike, for the “boring-from-within” process to bear fruit.
In the early summer of 1918, only a few months before the war ended,
the American Federation of Labor held its annual convention at St. Paul,
Minn., and there passed a resolution offered by Foster for the organization
of the steel industry. A committee was appointed to take charge of the work
and the converted radical, Foster, was made a member of this committee.
For a full year the committee’s work was carried on quietly. At the next
annual convention of the Federation, this time at Atlantic City, N. J., John
Fitzpatrick, one of Foster’s associates, reporting to the Federation, claimed
that 100,000 steel workers had affiliated themselves with one or other of the
unions belonging to the Federation.
Fitzpatrick was a man of an entirely different type from Foster. Mr.
Piez thus describes him: “He has in the ten years I have known him never to
my knowledge advanced or even advocated any constructive piece of
legislation, and he has held his position with the Chicago Federation
(Fitzpatrick is president of this Federation) because he is honest and
because he is a skilled labor politician. John Fitzpatrick hasn’t the slightest
idea of the problems of industry, he can’t conceive of overhead expense as
anything more than graft, and lacks all knowledge of the problems of
production, distribution, and the sale of the products of industry. His
horizon begins and ends with the wrongs that labor has suffered, and he
usually refers to wrongs that wise legislation and a changed relationship
have remedied years ago.”
But while the labor leaders had been busy collecting dues from and
enlisting sympathy for the “oppressed” steel workers there had, strange to
say, come no call for help from the steel workers themselves. They made no
claim of being down-trodden; rather did many of them resent, as a slur on
their manhood, the insinuation that they were. The union chiefs have since
claimed that they were appealed to by the workers, but not one iota of
evidence has ever been adduced to support this claim.

Whether or not Fitzpatrick’s report of 100,000 enlistments was correct
—subsequent events indicate that it was grossly exaggerated—the ruling
powers in the American Federation evidently believed that they now had
sufficient strength in the field to attempt an issue, and events consequently
moved forward quickly after the Atlantic City convention.
Their first move was the sending of a letter by Samuel Gompers to
Judge Gary, asking the head of the Steel Corporation to meet a union
deputation to discuss question affecting the welfare of the workers. This
letter was never answered.
Judge Gary’s refusal to reply to Gompers has been severely criticized
by union sympathizers and others. For example, by some of the members of
the Senate Committee that later investigated the strike. Gompers, who, in
the past, had seen legislatures bow to labor’s mandate, was not unnaturally
shocked at the “discourtesy.” But Judge Gary had enjoyed a previous
experience in corresponding with union representatives. A courteous reply
to a letter on somewhat similar lines from Michael F. Tighe, president of the
Amalgamated Association of Iron, Steel and Tin Workers, in which the
Judge had said that the Corporation did not negotiate with labor unions as
such, had been used as a basis for a report that the big company was “in
communication” ergo, negotiating, with the unions, and the Judge did not
want this experience repeated.
Whether it might not have been wiser had Judge Gary answered Mr.
Gompers’ letter and obviated the possibility of any misunderstanding by
giving the correspondence to the press is an open question. But he was
probably averse to being drawn into what would likely prove the beginning
of a long epistolatory controversy with the head of the Labor Federation.
This could not but have had an unsettling effect on the more easily
influenced among the steel workers, playing into Gompers’ hands.
It is also not unlikely that Judge Gary believed the labor unions were
resolved on forcing the issue of organizing the steel industry and that any
verbal preliminaries to the conflict would be worse than useless.
After this abortive attempt on the part of the union to start negotiations
with the steel industry through Judge Gary, and, ipso facto, to gain
recognition from the leaders of the industry, events moved quickly to a
climax. Early in July, 1919, the steel-trade organizers announced that they

were taking a vote of the workers, and not long after made the claim that 98
per cent. of the men employed in steel making had approved a strike unless
the Corporation yielded to a set of twelve demands drawn up by Foster and
his associates. As soon as these demands were made public it became plain
that a steel strike was inevitable unless the labor organizers receded from
their position. The demands were:

1. Right of collective bargaining.
2. Reinstatement of men discharged for union activities.
3. An eight-hour day.
4. One day’s rest in seven.
5. Abolition of twenty-four-hour shifts.
6. Increase in wages sufficient to guarantee American standard
of living.
7. Standard scales of wages in all trades and classifications of
workers.
8. Double rate of pay for all overtime, holiday, and Sunday
work.
9. Check-off system of collecting union dues and assessments.
10. Principles of seniority to apply in maintenance, reduction,
and increase of working force.
11. Abolition of company unions.
12. Abolition of physical examination of applicants for
employment.

Some of these demands were merely camouflage, inserted to give the
public an idea of imaginary wrongs against the steel worker. The steel
companies generally have been trying for years to institute a real eight-hour
day and have made the eight-hour day the basis of wage payments.
Practically all steel workers work only six days a week. The twenty-four-
hour shift is borne by a very small percentage of the workers and by these
only on widely separated occasions. The Corporation and its competitors as

well, following its lead, have repeatedly advanced wages without
solicitation from the men, and the claim that the wage they pay is
insufficient to permit American standards of living has not borne
investigation.
But the acceptance of such demands as the recognition of the right of
collective bargaining, coupled with the check-off system of collecting union
dues and assessments, would have handed over the companies, bound hand
and foot, to the unions. The application of the seniority principle in
maintaining, reducing, and increasing working forces would have obviously
made for inefficiency and destroyed the incentive to effort and good work
on the part of the men. Finally, physical examination of applicants for
employment in an industry where sound health, active muscles, and keen
eye-sight are necessary not only for the safety of the worker himself, but for
that of his associates, was a precaution which the companies could not
dispense with in fairness either to themselves or to their employees.
It is hardly necessary to discuss these demands in further detail. All the
circumstances indicated that they were merely a gauge of battle, hardly
intended for discussion.
These demands were announced by E. J. Evans, who in an interview
with press representatives was quoted as declaring that either they would be
accepted in toto by the Corporation or the steel workers would strike within
a week, shutting down the entire industry. This was about the middle of
August, 1919.
Nothing actually happened, however, until the 26th of that month. On
that day a committee of union leaders composed of the five gentlemen
whom Gompers had previously asked Judge Gary to meet arrived in New
York City and called at the offices of the Corporation seeking an interview,
only to meet with another polite refusal. Returning to their hotel, the
members of the committee thereupon sent the head of the Steel Corporation
a letter stating that they represented a “vast majority” of the workers of the
steel industry, and on this basis for the third time asked a hearing. To this
letter Judge Gary sent the following reply:

August 27th, 1919.

Messrs John Fitzpatrick, David J. Davis, William Hannon,
William Z. Foster, Edward J. Evans, Committee.
Gentlemen:
Receipt of your communication of August 26th is
acknowledged.
We do not think you are authorized to represent the sentiment of
a majority of the employees of the United States Steel Corporation
and its subsidiaries. We express no opinion concerning any other
members of the iron and steel industry.
As heretofore publicly stated and repeated, our Corporation and
subsidiaries, although they do not combat labor unions as such,
decline to discuss business with them. The Corporation and
subsidiaries are opposed to the “closed shop.” They stand for the
“open shop,” which permits one to engage in any line of
employment whether one does or does not belong to a labor union.
This best promotes the welfare of both employees and employers. In
view of the well-known attitude as above expressed, the officers of
the Corporation respectfully decline to discuss with you, as
representatives of a labor union, any matters relating to employees.
In doing so, no personal discourtesy is intended.
In all decisions and acts of the Corporation and subsidiaries
pertaining to employees and employment their interests are of
highest importance. In wage rates, living and working conditions,
conservation of life and health, care and comfort in times of
sickness or old age, and providing facilities for the general welfare
and happiness of employees and their families, the Corporation and
subsidiaries have endeavored to occupy a leading and advanced
position amongst employers.
It will be the object of the Corporation and subsidiaries to give
such consideration to employees as to show them their loyal and
efficient service in the past is appreciated, and that they may expect
in the future fair treatment.
Respectfully yours,
E. H. Gary,

Chairman.

Upon receipt of this letter the members of the Union Committee
returned to the steel centres and set on foot preparations for the strike.
Shortly before this the President of the United States had announced his
intention of calling an “Industrial Conference” at Washington, beginning
October 6th, to consider the grave industrial questions facing the country in
the wake of the World War, and particularly the relations between capital
and labor. It was obvious that one of the President’s reasons for calling the
conference at this time was to forestall the threatened steel strike, which had
been brewing for months, and to bring about, if possible, harmonious
relations between the steel companies and organized labor.
But the President did not stop there. He used the power of his great
office in every legitimate way to ward off the blow that was threatening the
country’s industry. Bernard M. Baruch, former head of the War Industries
Board, was commissioned by Mr. Wilson to endeavor to persuade Judge
Gary to confer with the unions, but Mr. Baruch was unable to change the
attitude of the head of the Corporation, who saw plainly what few others
realized at the time, that the issue was not merely that of a strike, but that
the very foundations of the country’s liberty were threatened, and that it was
no time for compromising. On the 10th of September, when all hope of
averting the strike seemed gone, the President made still another effort and
dispatched a telegram to Samuel Gompers, urging that action be postponed
until after the Industrial Conference.
At this time the situation stood thus: The organized portion of the steel
trade had voted to strike, leaving details and the decision as to the date in
the hands of the committee already named. Mr. Gompers referred the
President’s letter to the committee, which had full power to comply with the
request of the nation’s Chief Executive, but the committee declared that
postponement was out of the question. The strike date was set for
September 22nd, on which day, the union leaders confidently asserted, there
would not be a wheel turning or fire burning in any steel mill west of the
Alleghanies.
Thus was the fatal die cast. From that time both sides girded up their
loins and prepared for the conflict.